Wholesale inflation drops to 1.22% in December against a background of falling food prices: 10 points

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Reserve Bank of India tracks consumer inflation to formulate monetary policy

Wholesale inflation in December 2020: The inflation rate, based on the monthly wholesale price index (WPI), stood at 1.22% for the month of December 2020, compared to 2.76% in the month correspondent for 2019, according to government data. Thursday, January 14. Wholesale inflation during the month was recorded against a backdrop of falling food prices. At the same time, retail inflation also fell sharply to 4.59% in December, following lower food prices. The release of official data on wholesale inflation – or the rate of increase in wholesale prices comes as the economy prepares for a slow medium-term recovery from the COVID-19 crisis in hopes that coronavirus vaccinations invigorate the economy.

  1. The inflation rate based on the WPI food index fell from 4.27% in November 2020 to 0.92% in December 2020, according to data released by the Department for the Promotion of Industry and Domestic Trade. Retail inflation based on the Consumer Price Index (CPI) was 6.93% in November 2020.

  2. The index for the primary items group fell 3.11% to 146.5 in December, compared to 151.2 in November 2020. Prices of crude oil and natural gas (5.47%), minerals (5.36%) and non-food products (0.36%), up in December compared to November 2020.

  3. Food prices, at -4.85%, fell in December 2020 compared to November 2020, according to government data. The food index inflation rate in December was 0.92 percent, while the index was 154.4.

  4. Inflation for manufacturing products, which contribute around 65% to the total WPI, rose to 4.24% in December 2020, the seventh consecutive month of increase. Rising global commodity prices would also have contributed to this rise, as even on a monthly basis, manufacturing inflation rose 1.4%, ” said Prof. Krupesh Thakkar, CEO – Financial Markets , ITM B-School.

  5. The moderation of WPI inflation was helped by the fall in food prices; manufacturing and fuel prices have increased sequentially. Food prices fell in all areas, while the largest drops were in vegetable prices. The sweetness of perishables is similar to the retail price trend released earlier this week, according to a Barclays research report.

  6. While pulse inflation eased somewhat in December 2020, it is still either high in one or double digits. The high inflation seen in the vegetable category over the last few months suddenly turned into deflation in December 2020 due to the arrival of winter vegetables and the base effect, ” said the Dr Sunil Kumar Sinha, Senior Economist, India Ratings and Research.

  7. The wholesale price index is used to measure the average change in the selling price of goods or services in bulk by the wholesaler and the consumer price index measures the change in the selling price of goods or services at retail or the price of goods or services sold directly to consumers.

  8. “The drop in WPI is a good sign, but what needs to come down is retail inflation. The recent rise in crude prices may be a potential drag, ” said Mr. Sanjay Kumar, CEO and Managing Director of Elior India.

  9. According to Barclays, sustainable food products such as grains and pulses will see a small sequential decline in prices. However, the price of cooking oil, other proteins, and soft drinks are expected to increase slightly. Food inflation could fall sharply to 4.9 percent year-on-year in December from 10.2 percent in November.

  10. (Also read:Industrial production contracts 1.9% in November 2020) Meanwhile, the country’s industrial production contracted 1.9% in November 2020, after registering growth in October, according to government data on January 12 . According to data from the Industrial Production Index, the output of the manufacturing sector fell 1.7 percent in November, and mining output also contracted by 7.3 percent. Electricity production increased by 3.5%.

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