Costly food slows down fall in wholesale inflation

Mumbai: Inflation based on wholesale prices declined for the 14th consecutive month in December. However. the pace of fall in wholesale prices slowed down to 0.73 per cent due to rising  food prices. Though the WPI-based inflation remained in the negative zone, rising food prices indicate inflationary pressures and may serve as a red flag for inflation-focused RBI's  monetary policy. Compared to December’s inflation figure, the wholesale prices fell by  two per cent in November 2014 and 0.5 per cent in December 2014.

The prices of primary articles have grown by 14.91 per cent. The persistent rise in this segment, which includes food items among others, for four consecutive months has been the main component building the inflationary pressure. Overall, prices of primary articles recorded an increase of 5.5 per cent  over 2.3 per cent  in the previous month and 0.3% in the same period last year.

“Within primary articles, the rate of food inflation has been the main point of concern rising from 5.2 per cent  to 8.2 per cent in December, mainly on account of some select commodities which have recorded a persistent rise over the past few months,” said Madan Sabnavis, chief economist at Care Ratings. In this category, the price of pulses rose highest by 55.4 per cent, vegetables at 20 per cent, onions 25.9 per cent and egg, meat and fish five per cent.

The fall in WPI-based inflation is mainly caused by falling fuel and other commodity prices. However, rising service prices, which don’t get reflected in WPI, have kept retail inflation at an elevated level of 5.6 per cent.