WPI inflation cools to 22-month low of 4.95% in December on softening food prices

The wholesale price-based inflation declined to a 22-month low of 4.95 per cent in December 2022, mainly due to fall in prices of food articles, especially vegetables, and oilseeds. The Wholesale Price Index (WPI)-based inflation was 5.85 per cent in November 2022 and 14.27 per cent in December 2021. Last month, declining prices of vegetables and onions pulled down inflation rate of food articles by (-)1.25 per cent. However, wheat, pulses and potato remained expensive, along with protein rich items like milk and 'egg, meat and fish'.

Wholesale inflation in vegetables declined 35.95 per cent, and onion by 25.97 per cent.

In non-food articles, oilseeds and minerals too recorded a decline in inflation by 4.81 per cent and 2.93 per cent, respectively.

"The decline in the rate of inflation in December 2022 is primarily contributed by fall in prices of food articles, mineral oils, crude petroleum & natural gas, food products, textiles and chemicals & chemical products," the commerce and industry ministry said in a statement.

The last low level of WPI inflation was recorded in February 2021 at 4.83 per cent.

The deceleration in WPI comes in line with retail inflation data released last week which showed CPI inflation eased to 5.72 per cent in December. The consumer price index (CPI)-based inflation remained within the RBI's upper tolerance limit of 6 per cent for the second month in a row.

As per data released on Monday, WPI inflation in fuel and power rose marginally from 17.35 per cent in November to 18.09 per cent in December 2022, while in manufactured products it softened to 3.37 per cent last month.

WPI inflation in crude petroleum & natural gas cooled to 39.71 per cent in December, against 48.23 per cent in the previous month.

Barclays MD & Head of EM Asia (ex-China) Economics Rahul Bajoria said similar to CPI, WPI is also losing momentum, driven by both base effects and falling food prices.

"We expect further declines in import costs to keep WPI contained in the coming months, but CPI pass through may be limited for now," Bajoria said.

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