Lower prices of manufactured goods and fuel slightly eased India's December 2021 wholesale inflation on a sequential basis. Accordingly, the annual rate of inflation, based on wholesale prices, rose to 13.56 per cent from 14.23 per cent reported for November 2021.
However, on a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry has risen exponentially over December 2020, when it stood at 1.95 per cent.
"The high rate of inflation in December 2021 is primarily due to rise in prices of mineral oils, basic metals, crude petroleum and natural gas, chemicals and chemical products, food products, textile and paper and paper products etc., as compared to the corresponding month of the previous year," the ministry said in its review of 'Index Numbers of Wholesale Price in India' for December.
"The month over month change in WPI for the month of December, 2021 stood at (-) 0.35 per cent as compared to November, 2021," it added.
As per the data, the primary articles segment, which has one of the highest weightages in the WPI, increased at a faster rate of 13.38 per cent in December 2021 as compared to 10.34 per cent reported for November 2021.
In the fuel and power segment, which has a weightage of 13.15 per cent, the rise in inflation was recorded at 32.30 per cent, as compared to 39.81 per cent in November 2021.
Similarly, cost of manufactured products, which has a weightage of 64.23 per cent, increased at a slower rate of 10.62 per cent from 11.92 per cent in November 2021.
However, the growth rate of WPI food index consisting of food articles from the primary articles group and food products from the manufactured products group rose to 9.24 per cent from 6.70 per cent in the previous month.
"The WPI inflation printed in double digits for the ninth consecutive month, easing only modestly in December 2021 from November's high, with a jump in primary food and non-food inflation absorbing a part of the correction in other item," said Aditi Nayar, Chief Economist, ICRA
"The primary food inflation has spiked from the marginal 0.1 per cent in October 2021 to an unpleasant 23-month high of 9.6 per cent in December 2021, reflecting the unfavourable base, particularly for vegetables," Nayar added.
According to Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research: "The data indicates that the incremental price pressures in the primary article and the fuel segments have eased in the previous month, although a fresh rise in global crude prices can make such a relief temporary.
"As expected, there is a moderation in the wholesale food category driven by the seasonal drop in vegetable prices, including a sharp drop in onion and potato prices. While the pass through of higher input costs to manufactured products has continued in December 2021, the sequential growth is low at 0.22 per cent for that category due to the loss of momentum in demand recovery."
D.R.E Reddy, CEO and Managing Partner at CRCL LLP, said: "The WPI has fallen month on month, mainly due to a high base.
"The wholesale inflation is expected to weaken as we move ahead in 2022, largely due to falling commodity and primary article prices. High food and vegetable prices remain a concern."
Sunil Kumar Sinha, Principal Economist, India Ratings and Research, said: "Going forward, fuel prices are expected to stay at the elevated levels because Brent crude has inched up to $81 per barrel in the international markets in January 2022.
"Flare up in Covid cases due to the Omicron variant will jeopardise the normalisation of global supply chains with an upward pressure on transportation and distribution costs. Against this backdrop, India Ratings & Research expects the wholesale inflation to be in double-digits in rest of the fiscal."
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