Rural distress: WPI inflation eases to 3-month low of 4.64% in November

Wholesale food prices fell at a sharper rate of 3.31 per cent in November compared to 1.49 per cent in the previous month, reflecting the persistence of rural distress. This pulled down the overall wholesale price index (WPI) inflation rate to a three-month low of 4.64 per cent against 5.28 per cent in October.

November was the fifth month in a row when prices of food items kept declining.

Vegetables, pulses and fruits saw deflation, while non-vegetarian items such as eggs, meat and fish witnessed flat prices. Deflation rate in vegetables was as high as almost 27 per cent in November. 

The decline in overall WPI inflation rate was in line with its consumer price index (CPI)-based inflation. However, the fall in the latter was much steeper as the rate of price rise was down to a 17-month low of 2.33 per cent in November against 3.38 per cent in the previous month.

This was because food articles have much higher weight of more than 45 per cent in the CPI than 15.26 per cent in the WPI.

“The recent trend of a year-on-year correction in food prices does not augur well for the strength of rural demand in the immediate term. However, factors such as weak post-monsoon rainfall and a delay in rabi sowing pose some uncertainty regarding how long food prices would remain in the disinflation zone,” said Aditi Nayar, principal economist at rating agency ICRA.

Elsewhere, these were mainly non-food items in the primary articles category that saw a rise in inflation rate to 6.40 per cent in November against 4.14 per cent in the previous month. This was despite the fact that crude petroleum saw some easing of inflation rate at 40.06 per cent against 42.16 per cent. 
 

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The inflation rate in other items in this category — oil seeds and minerals — rose. Oil seeds saw it increasing to 10.70 per cent from 7.50 per cent, while minerals to 6.97 per cent from 5.81 per cent. 

Processed food items saw the inflation rate coming down to 0.70 per cent from 1.01 per cent. Among this category, sugar continued to witness deflation at the rate of 11.40 per cent against 11.20 per cent. 

The inflation rate in fuel and power was down to 16.28 per cent from 18.44 per cent. 
 

CARE Ratings said it expects WPI inflation rate to remain in the range of 4.5-5 per cent for the rest of the year, and will be above the CPI rates.