Wholesale inflation at eight-month high

New Delhi: Wholesale prices-based inflation surged to an eight-month high of 2.59 per cent in December, as against 0.58 per cent in November due to sharp rise in prices of food articles like onion and potato.

The annual inflation based on monthly wholesale price index (WPI) was recorded at 3.24 per cent in April 2019. WPI was at 3.46 per cent during December 2018.

Build up inflation rate in the financial year so far was 2.42 per cent compared to a buildup rate of 2.92 per cent in the corresponding period of the previous year, as per data released by the Office of Economic Adviser, Ministry of Commerce & Industry on Tuesday.

The rate of price rise for food articles rose to 13.12 per cent during December as against 11 per cent a month earlier, while for non-food articles it rose nearly four-fold to 7.72 per cent from 1.93 per cent in November.

Among food articles, vegetable prices surged by 69.69 per cent mainly on account of onion, which witnessed 455.83 per cent jump in prices, followed by potato at 44.97 per cent.

Onion prices ruled above Rs 100 per kg in various markets till recently because of crop damage due to excessive rains.

However, prices have started to move southwards with fresh crop arrival and imports.

The consumer price index (CPI) based retail inflation, as per data released on Monday, spiked to over a 5-year high of 7.35 per cent in December due to costlier food products.

The unexpected jump in inflation diminished the chances of the RBI cutting interest rate at its next monetary policy review due in early February. Experts feel CPI is expected to further harden next month due to elevated price level of food prices mainly vegetables.

"We now expect inflation to breach 8 per cent in January and then start bottoming out. However, this jump in inflation will perforce the RBI to relook at the inflation trajectory but in our view any change to a possible change in stance could be unwarranted as we find compelling evidence of significant slowdown in discretionary consumption," SBI Economic Research Department said in a report.

It further said RBI missed the bus in cutting rates in December and if food prices remain elevated, there is a fear of economy slipping into stagflation, which indicates low growth and high inflation.

This means RBI will possibly remain on hold in 2020, going by current trends. For manufactured products, the wholesale inflation cooled marginally (-) 0.25 per cent during the month under review. Fuel and power, as a category, too continued to show deflationary trend at (-) 1.46 per cent as against (-)7.32 per cent.