Wholesale price index-based (WPI) inflation declined for the third consecutive month to 3.15 per cent in November mainly due to lower prices of foods articles. While inflation for primary articles fell in November, fuel and power and manufactured products group inflation continued to rise during the month.
The consumer price index-based inflation that came in on Tuesday also recorded a two year low at 3.63 per cent in November from 4.2 per cent a month ago. Inflation of primary articles — comprising of food articles — dipped to 1.2 per cent in November from 3.3 per cent in October. The inflation for manufactured products rose to 3.2 per cent in November.
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Inflation rate for fuel items accelerated further to 7.1 per cent in November. The prices of vegetables dropped drastically by 24.1 per cent, while prices of wheat (10.71 per cent), cereals (7.32 per cent) picked up during the month.
“WPI inflation has come in at 3.15 per cent due to subdued food prices. However, we expect the rate to hover around 4 per cent mainly due to firming up of core inflation and a rise in food prices once the base effect weakens. Also the rabi crop will be critical in driving future prices as the present cash crunch has slowed down the rabi sowing especially for wheat,” said Madan Sabnavis, chief economist, Care Ratings.
Substantial decline in wholesale prices was witnessed in vegetables (-24.10 per cent), Onion (-51.51 per cent) and oil seeds (-5.05 per cent) last month. WPI inflation stood at (-) 2.04 per cent in November 2015 and 3.39 per cent in October this year.
Cash crunch due to demonetisation is one key factoring depressing demand, leading to lower inflation rate. The Reserve Bank of India in its monetary policy review earlier this month, kept its key benchmark interest rates unchanged holding that crude oil prices may firm up in the coming months.