India’s WPI Inflation Drops to 1.89 Percent in November on Food Prices

New Delhi: With the decline of prices of food items, especially vegetables and onions, India’s wholesale price index or WPI-based inflation fell to a three-month low of 1.89 per cent in November, down from 2.36 per cent in October, while the WPI-based inflation stood at 0.39 per cent in November last year, the government data showed on Monday.

With the dip in the prices, financial experts, however, expect at least a 0.25 per cent interest rate cut by the central bank during the upcoming February policy review. As per the data by the Ministry of Commerce & industry, inflation in food items eased to 8.63 per cent in November, as against 13.54 per cent in October.

“The decline was led by a dip in vegetable inflation which stood at 28.57 per cent, as against 63.04 per cent in October. Inflation in potatoes, however, continued to be high at 82.79 per cent, while in onions it fell sharply to 2.85 per cent in November,” the ministry said.

“The fuel and power category witnessed a deflation of 5.83 per cent in November, against a deflation of 5.79 per cent in October, while manufactured items, inflation was 2 per cent in November, against 1.50 per cent in October,” the ministry added.

The Centre appointed former revenue secretary Sanjay Malhotra as the new RBI Governor earlier this month, while in October the government had reconstituted the 6-member monetary policy panel. Experts, however, see some cut in rate cuts in the next monetary policy meeting.

“The moderation in WPI inflation was primarily led by primary food articles, which eased to a three-month low of 8.6 per cent from 13.5 per cent in the previous month, exerting downward pressure on the headline print to the tune of 91 bps between these months,” said ICRA Ltd’s senior economist Rahul Agrawal.

“Looking beyond the ongoing month, the arrival of kharif crops in the market, and the robust outlook for the rabi crop amid healthy sowing trends and elevated reservoir levels, augur well for the food inflation outlook,” Agrawal said.

In a research note, Barclays also said wholesale price inflation softened in November, due to lower primary food inflation, which more than offset higher inflation seen in manufactured products. “December to date, global prices are up 0.7 per cent and are likely to push December WPI inflation higher,” Barclays said.