January 15, 2023

New Delhi, India

India’s Wholesale Inflation Reaches 0.73%: A Detailed Analysis

India witnessed a surge in wholesale inflation, reaching a nine-month high of 0.73% in December 2023, marking the second consecutive month above zero. This comes on the heels of a recent report stating that retail inflation rose to a four-month high of 5.69% in the same month.

Deflationary Zone and Historical Context
Despite the recent uptick, the average Wholesale Price Index (WPI) inflation for the fiscal year 2023-24 remains in the deflationary zone at -1.1%. Comparing this to the previous periods, the rise in December is attributed to an unfavourable base effect from the same month in 2022 when the WPI contracted by 1.3%.

Components of WPI

Examining the components of WPI, December saw declines in all three major groups:

Primary Articles: Down 2.1% MoM
Fuel and Power: Down 0.71% MoM
Manufactured Products: Down 0.21% MoM
Impact on All-Commodity Index
The all-commodity index of the WPI dropped by 0.85% MoM. The food index also saw a significant decrease of 1.75% from November, influenced by lower prices of vegetables, fruits, eggs, meat, and fish, along with pulses.

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Economic Outlook and Projections

Economists anticipate a continued increase in wholesale inflation in the coming months, despite expectations of a decline in headline retail inflation. According to the Reserve Bank of India’s forecasts, Consumer Price Index (CPI) inflation is expected to cool to 4% in July-September 2024 before rising to 4.7% in the last quarter of the calendar year.

Conclusion

The recent surge in wholesale inflation in India, driven by base effects, sheds light on the intricate dynamics of economic indicators. As experts project future trends, the nation navigates through a delicate balance of price movements, impacting various sectors.

Also Read: Indian Rupee Strengthens as Inflation Eases, But Global Tensions Loom