Crisil inflation tracker: Headline WPI trips on food, core intact

Inflation based on the Wholesale Price Index (WPI) eased to 3.6 per cent in December, reversing a four-month run-up. In November, WPI inflation was at 3.9 per cent. The dip was led by an easing in food inflation, and mildly lower core inflation — the latter reflecting weak pricing power of manufacturers. Fuel inflation surged higher, while manufactured products’ inflation stayed unchanged for the third month in a row.

Curiously, the two inflation measures — WPI and Consumer Price Index (CPI) — saw a divergence in December. CPI inflation rose to 5.2 per cent, from 4.9 per cent in November, driven by three factors — One, vegetables inflation, which eased at the wholesale price level but firmed up at the consumer price level; two, housing inflation, which is tracked under the CPI and surged, reflecting the impact of higher house rent allowances paid to government employees; and three, inflation in personal care and effects, which is also measured under the CPI and rose mainly due to higher taxes on services under the goods and services tax regime.

In the first three quarters of this fiscal year, WPI inflation has averaged 2.9 per cent, compared with 0.7 per cent in the corresponding period a year ago. Most of the pick-up is due to higher oil and commodity prices, though lower food inflation has capped the upside. Food inflation dipped to 2.3 per cent, compared with 6.3 per cent, while fuel inflation rose to 9.7 per cent, from -6.5 per cent, and manufactured inflation rose to 2.6 per cent, from 0.7 per cent.