Dec wholesale inflation up at 2.59% on costlier veggies

Wholesale prices based inflation surged to an eightmonth high of 2.59% in December, as against 0.58% in November due to sharp rise in prices of food articles like onion and potato.

The annual inflation, based on monthly wholesale price index (WPI) was recorded at 3.24% in April 2019.

WPI was at 3.46% during December 2018. Build up inflation rate in the financial year so far was 2.42% compared to a build up rate of 2.92% in the corresponding period of the previous year, as per data released by the Office of Economic Adviser, Ministry of Commerce & Industry.

The rate of price rise for food articles rose to 13.12% during December as against 11% a month earlier, while for non-food articles it rose nearly four-fold to 7.72% from 1.93% in November.

Among food articles, vegetable prices surged by 69.69% mainly on account of onion, which witnessed 455.83% jump in prices, followed by potato at 44.97%.

Onion prices ruled above Rs 100 per kg in various markets till recently because of crop damage due to excessive rains. However, prices have started to move southwards with fresh crop arrival and imports.

The consumer price index (CPI) based retail inflation, as per data released on Monday, spiked to over a 5-year high of 7.35% in December due to costlier food products.

The unexpected jump in inflation diminished the chances of the RBI cutting interest rate at its next monetary policy review due in early February.

Experts feel CPI is expected to further harden next month due to elevated price level of food prices mainly vegetables.

"We now expect inflation to breach 8% in January and then start bottoming out. However, this jump in inflation will perforce the RBI to relook at the inflation trajectory but in our view any change to a possible change in stance could be unwarranted as we find compelling evidence of significant slowdown in discretionary consumption," SBI Economic Research Department said.

It further said RBI missed the bus in cutting rates in December and if food prices remain elevated, there is a fear of economy slipping into stagflation, which indicates low growth and high inflation.