India's wholesale inflation eased to a 21-month low of 5.85 percent in November, according to data released by the commerce ministry on December 14. At 5.85 percent, the latest Wholesale Price Index (WPI) inflation figure is 470 basis points lower than that of two months ago. A basis point is one-hundredth of a percentage point. WPI inflation stood at 8.39 percent in October and 14.87 percent in November 2021. The news of a decline in wholesale inflation comes two days after the news of a decline in retail inflation. Data from the Ministry of Statistics stated that the Consumer Price Index (CPI) inflation had declined to 5.88 percent in November. For the first time in several months, it has come below the upper limit of the tolerance band (2-6 percent) of the Reserve Bank.
Wholesale inflation is lower than retail inflation for the first time since February 2021
For the first time since February 2021, Wholesale Inflation (WPI) has been lower than Retail Inflation (CPI). The wholesale inflation at that time was 4.83 percent and the retail inflation was 5.03 percent. The sharp decline in WPI inflation in November was attributed to a sequential fall in the prices of two of the three major commodity groups of the WPI basket. Food inflation for November came down to a 22-month low of 2.17 percent. It has come down to almost one-third of the 6.48 percent in October. It has declined by 1.8 percent every month. Apart from this, in the case of products of the construction sector, the wholesale inflation rate has come down from 4.42 percent to 3.59 percent. There has been a softening of 0.3 percent in comparison to October.
Big relief in wholesale inflation of fuel and energy sector
The moderation in inflation in manufacturing products is significant as it accounts for nearly two-thirds of the WPI basket. There has been a significant decline in the wholesale inflation of the fuel and power sector. It has slipped to 17.35 points as compared to 23.17 in October. On a sequential basis, this index has registered a growth of 2.8 percent. The All Commodity segment of WPI registered a decline of 0.3 months in November. This fall in retail inflation and wholesale inflation will get the support of policymakers. RBI has increased the repo rate by 225 basis points to 6.25 percent.
Wholesale inflation was in double digits for 18 consecutive months before October
Let us tell you that before falling to 8.39 percent in October, the wholesale inflation remained in double digits for 18 months. CPI inflation remained above the medium-term target of 4 percent for 38 consecutive months. The central bank had failed to keep retail inflation within its tolerance range of 2 to 6 percent for three consecutive quarters. In such a situation, the latest figures for inflation can be a relief. The next meeting of the monetary policy committee of the central bank is scheduled for February 6-8. Economists think that the rate-setting panel may decide on the final increase in the repo rate during this period.
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