NEW DELHI: Wholesale price inflation (WPI) rose to 2.37 per cent in December 2024, driven by higher prices of non-food articles, manufactured items, and fuel and power, even as food inflation showed some easing.
This marks an increase from 1.89 per cent in November and 0.86 per cent in December 2023, according to government data released on Tuesday.
Retail inflation data released on Monday showed that consumer price index (CPI) based inflation eased to a four-month low of 5.22 per cent in December, primarily due to a decline in food prices.
The Reserve Bank of India’s monetary policy committee is set to announce its interest rate decision on February 7. Following its December decision to ease liquidity by reducing the cash reserve ratio by 50 basis points, the central bank is widely expected to cut interest rates further in 2025.
Food inflation under the WPI eased slightly to 8.47 per cent in December from 8.63 per cent in November, with cereals, pulses, and wheat contributing to the decline. However, inflation in vegetables remained elevated at 28.65 per cent, with potatoes surging 93.20 per cent and onions at 16.81 per cent.
Non-food items
Non-food articles, such as oil seeds, saw a spike in inflation, rising to 2.46 per cent in December from a deflation of 0.98 per cent in November. The fuel and power category recorded a deflation of 3.79 per cent, improving from the 5.83 per cent deflation in November.
Manufactured items saw inflation inch up to 2.14 per cent from 2 per cent in the previous month.
Rahul Agrawal, Senior Economist at ICRA, noted that the uptick in WPI was primarily driven by fuel and power, along with primary non-food articles, which together accounted for 42 basis points of the 48 basis points increase in the overall index.
Global commodity prices, particularly crude oil, have risen in January 2025, with the Indian basket of crude oil surging by 5.8 per cent month-on-month during January 1-13, amid tighter US sanctions on Russian oil producers. Additionally, the depreciation of the rupee against the dollar to above 86.5 has added upward pressure on import costs.
ICRA projects WPI inflation to rise further to 3 per cent in January 2025 and to average 2.5 per cent in the current fiscal year, increasing to 3-3.3 per cent in FY26.
Barclays also highlighted the impact of a low base on the 2.37 per cent WPI rise, noting sharp sequential increases in electricity prices and easing food prices.
The evolving inflation dynamics and global market pressures set the stage for a closely watched RBI decision, with expectations of further rate cuts to support economic growth.