India’s wholesale inflation cools to 21-month low at 5.85%

India's wholesale price index-based inflation (WPI) eased to a 21-month low of 5.85% in November 2022, down from 8.39% in October on an annual basis, shows the provisional data shared by the commerce ministry today. The WPI data comes two days after the government shared the retail inflation data, which showed India's headline inflation eased to an 11-month low of 5.88% in November 2022. 

On a month-on-month basis, the WPI index shrunk by 0.26% in November as compared to 0.39% growth in October. During the same period last year, the wholesale inflation was at a high of 14.87%.

The fall in food prices, metals, textiles, chemicals and paper products prompted easing of the wholesale inflation in November. "Decline in the rate of inflation in November 2022 is primarily contributed by fall in prices of food articles, basic metals, textiles, chemicals & chemical products and paper & paper products as compared to the corresponding month of the previous year,” a commerce ministry statement said.

The wholesale inflation was recorded lower than CPI inflation for the first time in 21 months. In February 2021, the whole inflation was recorded at 4.83% while retail inflation stood at 5.03%. The ministry data shows the WPI inflation in the primary articles, which has the second highest weightage among all commodities, rising 5.52% on a YoY basis and recording a 0.26% decline in the index on an MoM basis. Manufactured products, with the highest weightage, recorded a 0.28% change in its index on an MoM basis. The food index, with a 24.38% weightage, saw a 1.8% change as compared to October.

Though India's retail inflation saw a major decline in October, it has remained above the upper tolerance level — i.e. 6% – for all 3 consecutive quarters in January-September 2022 and October 2022 as well. As per the government, soaring commodity prices, the Russia-Ukraine war, and pandemic-induced supply-demand imbalances have contributed to high inflation worldwide, including in India. The onset of heat waves and uneven rainfall in the later part of the monsoon season has also led to crop damage and a rise in vegetable prices in the country.

Like its global peers, India has been severely impacted by high inflation, prompting the RBI to announce tightening monetary measures. In the recently held MPC meet announcements on December 7, the RBI hiked the key repo rate by 35 basis points to 6.25%, increasing the repo rate by 2.25 percentage points in half a year. 

Meanwhile, the finance ministry has said the Reserve Bank’s (RBI) report on reasons behind inflation remaining beyond its tolerance band for several months can’t be revealed as regulations do not provide for "making the report public". The RBI has already submitted the mandatory explanation report regarding the reasons for missing the inflation targets to the government. The said provisions of the RBI Act, 1934, and regulations do not provide for "making the report public", Minister of state in the finance ministry, Pankaj Chaudhary, said in Parliament recently.