WPI inflation rises in Dec on costlier food items

Two crucial data released by the government this week do not offer a very encouraging picture of the India economy.

In December 2014, however, it was (-)0.50 percent.

Wholesale Price Index inflation grew to (-) 0.73 in December, against the estimate of (-)1.15%.

The wholesale price index fell 0.73 percent year-on-year following a 1.99 percent decrease in November. Now let us look at what has caused the food prices to shoot up by as much as 8 percentage age points over the last four months between September and December 2015, an extraordinary development in any circumstances.

Onion prices inflation eased to 25.98% during the month compared with 52.69% rise in the last month.

The inflation rate for Fuel & Power rose to -9.15%.

The index for “Food Articles” group rose by 0.6 percent to 272.7 (provisional) from 271.0 (provisional) for the previous month due to higher price of poultry chicken (18%), fish-inland (10%), beef & buffalo meat (9%), pork and bajra (4% each), egg, tea, fish-marine and condiments & spices (3% each), jowar, urad and barley (2% each) and maize, arhar and wheat (1 % each). IIP fell the most in over four years by 3.2 per cent on sharp fall in manufacturing output.

Accordingly, the annual rate of inflation based on the final index stood revised at -3.70 percent as compared to -3.81 percent reported provisionally on that date.

Governor Raghuram Rajan had on Wednesday said the bank will carefully look into the latest data on industrial production, and come out with a “reasoned response”. This is bad news as this sharp surge in wholesale food prices may soon further push up consumer prices well above the 6% targeted by the RBI and put a big question mark on the soft monetary stance the central bank had adopted in the past year.

Retail inflation has been rising for five straight months and stood at 5.61 per cent in December. For food products, the rise was 0.3 percent in the past month under review, and 3.12 percent since April 2015.