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Wholesale deflation eases in December as price pressures rise

14 January, 2016

Wholesale prices fell at the slowest pace in a year in December as prices of pulses and vegetables accelerated, government data showed on Thursday.

The wholesale price index (WPI) slid 0.73 per cent in December after falling 1.99 per cent the previous month. This is the fourth month in a row that wholesale deflation has eased.

The index captures price movements in three broad categories—primary articles, fuel and power, and manufactured products. Prices of manufactured products, which account for two-thirds of the index, fell 1.36 per cent in December compared with a 1.42 per cent drop in October.

Primary articles prices increased for a third consecutive month to a 17-month high of 5.48 per cent, propped up by a 55 per cent jump in pulses prices and 20 per cent rise in vegetables.

Wholesale prices could start rising in coming months, despite the slump in prices of crude oil, as the base effect wanes.

“With sharp upward movement over the last two months, there is now an outside chance of the headline WPI print turning positive next month,” said Shubhada Rao, chief economist at YES Bank. She expects the WPI to increase towards 0.6 per cent to 1 per cent by March.

Crude prices have fallen below $30 a barrel, but retail prices in the country haven’t fully reflected that drop yet as the government has increased taxes on petrol and diesel to boost its coffers. Crude oil is India’s biggest import item and the fuel index has almost 15 per cent weight in the WPI.

Another factor that could keep prices from rising is subdued demand in the manufacturing sector. India’s manufacturing output contracted in December, after rising for 25 months, according to the Nikkei Purchasing Managers’ Index.


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Wholesale deflation eases in December as price pressures rise

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