Food prices shot up sharply in December indicating return of inflationary pressures, even as overall inflation managed to remain in the negative zone at 0.73 per cent.
For the 14th month in a row, wholesale prices fell in December, but the rate of decline at 0.73 per cent was the slowest in last one year as vegetables, pulses and onion became dearer.
The wholesale price index (WPI)-based inflation, which has remained in the negative zone since November 2014, has inched up in the last four months. It was (-) .99 per cent in November. In December 2014, however, it was (-)0.50 per cent.
“It (inflation) is within our expected lines and within RBI’s range,” Finance Minister Arun Jaitley said while speaking to reporters on the sidelines of a function here.
Food inflation shot up to 8.17 per cent in December as against 5.20 per cent in the previous month.
Inflation in pulses and onion was 55.64 per cent and 25.98 per cent, respectively. The rate of price rise in case of vegetables was 20.56 per cent in December and for fruits, it was 0.76 per cent.
India Ratings & Research Chief Economist Devendra Pant said a sharp uptick in food inflation and an unabated increase in the price of pulses is a matter of concern.
Industry body Ficci said continuation of the deflationary trend was an indication of weak demand in the economy. “We hope that the central bank will respond to the situation appropriately and take steps that would aid the process of industrial recovery.”
The Reserve Bank may also face pressure to reduce the key lending rate further as industrial production contracted 3.2 per cent in November, its sharpest decline in four years.
Besides IIP, the central bank also looks into retailinflation data while firming up its monetary policy stance.
Retail inflation has been rising for five straight months and came in at 5.61 per cent in December. RBI’s next bi-monthly policy review will be unveiled on February 2.