WPI inflation cools to 22-month low of 4.95% in December

At the broad-segments level, while the primary articles’ inflation declined to a 23-month low of 2.4 per cent, the manufacturing inflation edged down to a 25-month low of 3.4 per cent in December 2022.

However, the fuel and power inflation rose to 18.1 per cent in December 2022 from a 20-month low of 17.4 per cent in the previous month.

“The decline in the rate of inflation in December 2022 is primarily contributed by fall in prices of food articles, mineral oils, crude petroleum & natural gas, food products, textiles and chemicals & chemical products,” the commerce and industry ministry said in a statement.

The WPI inflation had slipped below 5 per cent for the first time since February 2021, when it was at 4.83 per cent.

Last week, data showed that the CPI-based retail inflation rate eased down from the previous month, staying within the Reserve Bank of India’s (RBI) comfort range of 2 per cent-6 per cent for a second month.

Sunil Sinha, Principal Economist, India Ratings & Research, said the drop in primary articles was mainly on account of a massive decline in prices of vegetables (36 per cent year-on-year, a new record in the 2011-12 series) owing to seasonal factors and a high base of the same period last year.

Though still very high, crude petroleum and natural gas inflation declined to a 16-month low of 39.7 per cent YoY in December 2022.

Despite the category of food articles witnessing deflation in December 2022, concerns are emerging on the food front.

Cereals in December 2022 witnessed the fifth consecutive month of double-digit inflation. It is now at a 113-month high. Except for paddy and ragi, all other grains are witnessing double-digit inflation on a sustained basis.

Manufacturing grain mill products (like maida, atta, basmati rice, etc.) reached a 113-month high of 14.3 per cent in December 2022. Milk inflation increased to a 92-month high of 7 per cent in December 2022. As a result, inflation in dairy products reached a 100-month high of 14.4 per cent in December 2022.

The electricity inflation shot up to 16.6 per cent in December 2022 from a 15-month low of 9.5 per cent a month ago.Even the inflation under other heads such as petrol, diesel and air turbine fuel continues to be at elevated levels in December 2022, Sinha said.

India Ratings and Research estimates that due to the high base effect and softening of global commodity prices, wholesale inflation is expected to come in at around 3.1 per cent in the fourth quarter of FY23.