Steeper prices of pulses and vegetables such as onions and tomatoes are likely to drive up inflation in December, too. The wholesale price index (WPI)-based inflation moved away from deflationary zone and rose to an eight-month high of 0.26% in November because of a fading base effect and rise in prices of primary articles and food items.
Wholesale inflation in food items rose to 8.18% in November, which was a three-month high, with prices of pulses, onions, vegetables as well as cereals and paddy registering a sharp rise. WPI inflation in pulses shot up to 21.64% in November and in onions by 101.24%. Similarly, prices of cereals by 7.12% last month while that of paddy rose by 10.44%.
Experts note that prices of pulses, tomatoes and onions could remain a challenge in coming months as well and WPI inflation will rise in coming months keeping retail inflation elevated at over 5%.
Aditi Nayar, Chief Economist, Head-Research and Outreach, ICRA Ltd noted that as per the data released by the Department of Consumer Affairs, the average wholesale price of cereals, pulses, salt and sugar have risen sequentially in the ongoing month. Moreover, the average prices of tomato continued to surge in December so far, while that of other key vegetables as well as most varieties of edible oils have softened, compared to November.
“Near-term challenges remain, stemming from the uninterrupted surge in tomato prices and the mixed trend seen so far in rabi sowing, with key crops like rice, wheat, jowar and pulses lagging the year-ago levels,” she said, adding that kharif output is estimated to have declined in this fiscal, relative to FY2023.
Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays said that there was some easing in momentum was seen in wholesale prices of wheat, rice, pulses and spices, categories among non-perishable foods that drove inflation in the past year.
“The magnitude of increase in wholesale food prices was much more than in retail food prices (which rose 0.9% month on month), indicating wholesalers did not pass through the entire price rise to consumers, which may be reflected in elevated retail food prices in December, unless supply (particularly of vegetables) increases,” he said.
Suman Chowdhury, Chief Economist and Head – Research, Acuité Ratings & Research said WPI inflation is expected to inch up gradually over the next few months, given healthy industrial and consumer demand amidst the backdrop of steady food inflation. This is set to hold CPI inflation in the range of 5%-5.5% over the next two quarters.
In November, consumer price index based inflation rose to a three month high of 5.55% from a year ago.
