India Wholesale Inflation Near 2-Year Low On Further Food Price Fall

India’s wholesale price inflation continued its easing trend in December to the lowest level in twenty-two months, thanks to the continued fall in food prices, provisional data from the Ministry of Commerce and Industry revealed on Monday.

The wholesale price index climbed 4.95 percent year-over-year in December, slower than the 5.85 rise in November. Economists had expected inflation to ease to 5.60 percent.

Further, the rate of inflation remained below the 5.0 percent mark for the first time and at the slowest pace since February 2021, when prices had risen 4.83 percent.

The slowdown in inflation was contributed by a fall in the price of food articles, mineral oils, crude petroleum and natural gas, food products, textiles, and chemicals and chemical products, the ministry said.

“The drop in Indian wholesale price inflation for the sixth month in a row in December further reinforces our view that the MPC will draw the tightening cycle to a close after one more rate hike in its meeting in February,” Thamashi De Silva, assistant India economist at Capital Economics, said.

The overall inflation was primarily driven by an 18.09 percent surge in fuel and power prices. Prices for primary articles grew 2.38 percent and those for manufactured products gained 3.37 percent.

Inflation based on food prices softened notably to 0.65 percent in December from 2.17 percent in November, and costs for non-food articles logged an annual growth of 3.71 percent.

On a monthly basis, wholesale prices dropped 1.12 percent in December, after a 0.52 percent decline in the prior month.

Data released last week showed that India’s consumer price inflation eased slightly to 5.72 percent in December from 5.88 percent in November. The inflation rate came within the Reserve Bank’s tolerance band of 2.0 to 6.0 percent for the second straight month.

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