WPI rises further

Inflation based on WPI spurted further in November to 3.9 per cent, up from 3.6 per cent in October. The pick-up was driven by higher food inflation (especially vegetables), and a mild uptick in core inflation. Fuel inflation dipped, while manufactured products’ inflation stayed unchanged. With this, WPI inflation has climbed nearly 300 basis points from its lowest point 0.9 per cent reached in June, due to higher inflation in food and fuel. Low-base effect and a sustained pick-up in vegetables prices have driven food inflation up, while fuel inflation has risen because of a surge in global crude oil prices. Between April and November this fiscal year, WPI-based fuel inflation averaged 9.8 per cent, compared with an average decline of 7.5 per cent in the corresponding period last fiscal year. Going forward, food inflation is expected to stay in check because of bumper farm output and benign global prices. But if global energy prices continue to spiral up, and the rupee stays weak, it can have a bearing on imported inflation. Also, as the pent-up consumption demand in the economy returns and manufacturers’ pricing power improves, some upside inflation is inevitable.

In November, overall food inflation (food articles plus manufactured food) climbed to 4.1 per cent, from 3.2 per cent, driven by a nearly 59.8 per cent rise in vegetables inflation (prices of onion and tomato have skyrocketed since August).