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Wholesale Inflation Inches Up to 0.11% in December

Wholesale inflation, as measured by the wholesale price index, inched up to 0.11% in December, against being unchanged in November.
Wholesale Inflation Inches Up to 0.11% in December

Wholesale inflation rate, as measured by the wholesale price index, inched up to 0.11 per cent in December, snapping a six-month easing trend as food costs jumped up year-on-year. In November, the inflation rate was unchanged from year-earlier levels.

There was a spurt in food prices, with food inflation increasing to a 5-month high of 5.20 per cent in December against 0.63 per cent in November. Potato prices rose 13.76 per cent year-on-year while fruit prices surged 17.87 per cent. Saugata Bhattacharya of Axis Bank said wholesale food inflation edged up in December because of unseasonal rains in many parts of the country.

Retail inflation numbers, which was announced earlier this week, rose to 5 per cent in December, from 4.4 per cent on year in November, as prices of some food items, including fruits and vegetables. But the retail inflation numbers were below the RBI's target level of 6 per cent by January 2016.

However, a fall in fuel prices helped offset the rise in food prices. Fuel prices fell 7.82 per cent in December from a year-earlier level. In November, fuel prices fell 4.91 per cent.

Despite the inching up of inflation numbers, some analysts expect the RBI to cut rates in its February 3 policy review. RBI governor Raghuram Rajan had earlier said that the central bank could change rates even outside the policy review cycle.

The plunge in global oil prices and weak industrial growth have also increased pressure on the RBI to lower rates.

Eminent banker Uday Kotak recently tweeted, "As oil collapses deflation worries world. Good for India's macro but makes growth difficult. With Rupee stable time ripe for rate cut cycle." 

Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance, said, "Fall in commodity prices have brought down wholesale, consumer inflation. All indicators now point that the RBI should cut rates by at least 25 basis points in its next policy meeting on February 3." (With Agency Inputs)

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