WPI inflation hits record high of 14.23%, raises retail inflation fears

This is the highest WPI rate in 2011-12 series with WPI inflation remaining in double digits for 8th month in a row

Higher food and fuel prices pushed the wholesale price inflation (WPI) rate to a record high in November, raising fears that this may translate into elevated retail inflation in coming months as well.

The data released by the industry department showed the WPI-based inflation rate had galloped to 14.23 per cent in November from 12.54 per cent a month earlier as the food inflation rate (4.88 per cent) turned positive while that for fuel inflation rose to 39.81 per cent on comparatively high petroleum prices.

This is the highest WPI rate in the 2011-12 series with wholesale price inflation remaining in double digits for the eighth consecutive month.

Crude petroleum prices increased 91.74 per cent in November as against 80.57 per cent in October. However, inflation for manufactured items marginally eased to 11.92 per cent in November, signalling that producers may be absorbing part of the rise in input costs.

Among food items, fruit (15.5 per cent) and protein-rich items like eggs, milk, and fish (9.66 per cent) saw a rapid rise in prices compared to their level a year ago.

Core inflation, which is non-food, non-fuel, climbed to a fresh high of 12.3 per cent in November.

Aditi Nayar, chief economist at ICRA, said the spike in the WPI rate to an all-time high came as a shock, especially with most non-core categories showing a price rise that was much steeper than expected.

“The unseasonal surge in vegetable prices, as well as a rise in inflation for egg, meat and fish, and condiments and spices underpinned the turnaround in the primary food inflation rate to a 13-month high 4.9 per cent in November from the disinflation of 1.7 per cent in the previous month. A falling base is likely to push up the inflation rate for primary food articles further in the current month in spite of an anticipated sequential moderation in prices of various food items,” she added.

Nayar said although the prices of various food items had displayed a seasonal downward trend and those of several commodities had corrected to an extent following the reality check provided by the Omicron variant, the rupee had depreciated in recent sessions, which would curtail the extent of moderation in the WPI rate in December.

“We now forecast the WPI rate to average 11.5-12 per cent in FY22, with headline and core inflation expected to continue to print in double-digits over the next three months and one month, respectively,” she said.

The government blamed an unfavourable base for the spike in the WPI rate.

“Higher inflation figure is primarily due to low base effect in comparison with November 2020 data. Fuel and power have been the biggest contributors of higher inflation rate. Countries which traditionally have reported low inflation rates like the US have also now reporting record inflation levels due to these global effects,” the commerce and industry ministry said in a statement.

Reserve Bank of India Governor Shaktikanta Das last week said as economies reopened, the spurt in catch-up demand had met with choked supply chains, the shortage of key inputs, and tightening labour markets. “Combined with high energy and commodity prices, this has ignited long-dormant inflation in a number of countries, even before output has returned to pre-pandemic levels. Several central banks in both advanced and emerging market economies have begun unwinding from crisis-time policies as warranted by their own growth-inflation dynamics,” he had said.