Wholesale price inflation hit zero in November, its slowest level since July 2009, as fuel inflation dropped to a five-year low and the rate of price rise in food items fell drastically due to favourable bases and declining global commodity prices, showed the official data released on Monday.
With retail inflation having hit a fresh low of 4.38 per cent in November and industrial production at a three-year low in October, the latest wholesale price index (WPI) inflation data pile on the pressure on the Reserve Bank Of India (RBI) to effect the much-anticipated rate cut to boost the economy.
Analysts say inflation will start inching up from now, as the favourable base withers off, but most agree that CPI inflation, the RBI’s preferred gauge, will remain below the targetted level of 6 per cent in March.
The RBI, some analysts said, might choose to wait until the conducive base effect fades away substantially (WPI and CPI inflation started easing from December 2013 onwards). The central bank might also want to see how credibly the government stocks to its fiscal deficit reduction target in the coming Budget, given that Governor Raghuram Rajan has consistently stressed the quality of fiscal consolidation.
WPI food inflation moderated to just 0.63 per cent last month on a 28.6 per cent contraction in vegetable prices and primary article inflation hit -1 per cent. Inflation in fuel products, too, remained in the negative territory, at -4.9 per cent in November, the lowest since November 2009 and compared with 0.43 per cent in October. Manufactured products inflation, too, moderated to 2.04 per cent in November, compared with 2.43 per cent in the previous month. There was a 0.26 per cent decline in manufactured products inflation in November from the previous month, thanks primarily to the fall in prices of chemicals and basic metals.
Core WPI inflation, price rise in non-food manufactured items, further eased to 2.2 per cent last month, the lowest since September 2013 and compared with 2.5 per cent in October.
The persistent double-digit inflation in fruit this fiscal and the possibility of some kind of a supply-induced shock in the coming months due to a projected 5 per cent drop in Kharif production pose some risks to food inflation in the coming months, said Anis Chakravarty, senior director at Deloitte India. ICRA’s Aditi Nayar, too, said the month-on-month rise in protein products items may continue. FE