After seven months, India's wholesale inflation back in positive territory

Wholesale inflation in India, based on the Wholesale Price Index, is back in positive territory after staying in the negative zone for the seventh straight month until October.

Data released by the Ministry of Commerce and Industry on Thursday afternoon showed India's wholesale inflation in November stood at 0.26 per cent. In October, it was at (-) 0.52 per cent.

The ministry noted positive rate of inflation in November is primarily due to an increase in prices of food articles, minerals, machinery and equipment, computers, electronics and optical products, motor vehicles, other transport equipment and other manufacturing.

Economists say a little rise in wholesale inflation is good as it typically incentivises goods manufacturers to produce more.

In April this year, the wholesale inflation went into negative territory. Similarly, in the initial days of Covid, in July 2020, the WPI was reported as negative.

Overall wholesale inflation was 8.39 per cent in October 2022 and has fallen since then. Notably, the wholesale price index (WPI)--based inflation had been in double digits for 18 months in a row till September last year.

The government releases index numbers of wholesale prices on a monthly basis on the 14th of every month (or the next working day). The index numbers are compiled with data received from institutional sources and selected manufacturing units across the country.

Meanwhile, retail inflation in India rose at its fastest pace in three months in November, largely due to a spike in food prices.

The retail inflation or Consumer Price Index, in November was 5.55 per cent. The October consumer price index (CPI) was at 4.87 per cent and 5.02 per cent in September.

Retail inflation in India though, is in the RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario.

Food inflation, which accounts for nearly half of the overall consumer price basket, was 8.70 per cent in November, against 6.61 per cent reported the previous month.

Prices of cereals rose by 10.27 per cent and vegetables by 17.7 per cent in November on a year-on-year basis. Pulses were up by 20.23 per cent, spices by 21.55 per cent and fruit prices were up 10.95 per cent last month, official data released by the Ministry of Statistics and Programme Implementation showed.

The higher month-on-month retail inflation comes close on the heels of RBI having maintained the status quo in the repo rate for the fifth straight occasion, besides flagging concerns on the inflation outlook.

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.