December Wholesale Price Index: Inflation Rises to 0.83% as Manufacturing, Food Articles, and Textiles See Price Increases
Wholesale prices in India saw a notable increase in December, with the Wholesale Price Index (WPI) rising to 0.83%. This marks the second consecutive month of inflation following a period of deflation. Official data released on Wednesday indicated that the rise in wholesale prices was influenced by various sectors, including manufacturing and food products. In contrast, food articles continued to experience deflation, albeit at a reduced pace compared to the previous month.
Inflation Trends in December
The recent data reveals a shift in inflation trends, with the WPI moving from negative to positive territory. In October and November, the WPI recorded deflation rates of -1.21% and -0.32%, respectively. In December of the previous year, wholesale inflation was significantly higher at 2.57%. The industry ministry attributed the December increase to rising prices in several sectors, including manufacturing, minerals, machinery, food products, and textiles. This broad-based increase indicates a recovering economy, although food articles still faced deflation.
Food Prices and Deflation
Despite the overall rise in wholesale prices, food articles remained in deflation. However, the rate of deflation eased considerably, narrowing to 0.43% in December from 4.16% in November. Vegetable prices, which had seen significant negative inflation, also showed improvement, with the contraction reducing sharply to 3.50% in December compared to a staggering 20.23% in the previous month. This trend suggests a potential stabilization in food prices, which has been a concern for consumers and policymakers alike.
Manufactured Products and Fuel Prices
The inflation rate for manufactured products continued to strengthen, rising to 1.82% in December from 1.33% in November. Non-food articles also saw an increase in inflation, reaching 2.95% during the month, up from 2.27% in November. Conversely, the fuel and power segment remained in deflation, with prices falling by 2.31% in December, slightly more than the 2.27% decline recorded in the previous month. This mixed picture of inflation across different sectors highlights the complexities of the current economic landscape.
Impact on Retail Inflation and Monetary Policy
Retail inflation also experienced an uptick, rising to 1.33% in December from 0.71% in November, primarily driven by increasing food prices. In response to subdued inflation, the Reserve Bank of India (RBI) has lowered policy interest rates by a total of 1.25 percentage points in the current financial year. The central bank recently revised its inflation forecast for the year downward to 2%, citing rapid disinflation in the economy. The RBI, which primarily uses retail inflation as a benchmark for its monetary policy, reduced the key policy rate to 5.25% last month, describing the economy as being in a “rare Goldilocks period” of strong growth alongside low inflation. Additionally, the RBI raised its GDP growth estimate for FY26 to 7.3%, reflecting optimism about the economic outlook.
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