New Delhi: Wholesale price-based inflation declined to a 3-month low of 1.89 per cent in November on cheaper food items, and experts predicted a 0.25 per cent interest rate cut by the RBI in the policy review in February. The Wholesale Price Index (WPI) based inflation was 2.36 per cent in October 2024. It was 0.39 per cent in November last year. In August, 2024, it was 1.25 per cent. As per the data, inflation in food items eased to 8.63 per cent in November, as against 13.54 per cent in October.
The decline, led by a dip in vegetable inflation, stood at 28.57 per cent, against 63.04 per cent in October. However, inflation was constantly high at 82.79 per cent for potatoes and a sharp fall to 2.85 per cent for onions in November. The fuel and power category witnessed a deflation of 5.83 per cent in November, against a deflation of 5.79 per cent in October. In manufactured items, inflation was 2 per cent in November, against 1.50 per cent in October.
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In a research note, Barclays said wholesale price inflation softened in November due to lower primary food inflation, more than offset higher inflation witnessed in manufactured products. "December to date, global prices are up 0.7 per cent and are likely to push December WPI inflation higher," Barclays said.
WPI inflation drops to a 3-month low of 1.89% in November due to cheaper food, with experts predicting a 0.25% RBI rate cut in February.
According to the consumer price index data released last week, retail inflation moderated to 5.5 per cent in November, compared with 6.2 per cent in October. Barclays said this is within the monetary policy committee's (MPC) tolerance band of 2-6 per cent, indicating that CPI inflation will drift closer to the 4 per cent target by March 2025.
"We expect the MPC to cut the policy repo rate by 25bps in its February meeting. We are mindful of the almost new-looking MPC that will be in charge of this decision," Barclays said.
WPI Inflation Moderates, Outlook for Food Prices Remains Positive
The government appointed a new RBI Governor earlier this month. Last week, former Revenue Secretary Sanjay Malhotra took over as the 26th RBI Governor, replacing Shaktikanta Das. In October, the government had reconstituted the 6-member MPC.
ICRA Ltd Senior Economist Rahul Agrawal said the moderation in WPI inflation driven by primary food articles eased to a three-month low of 8.6 per cent from 13.5 per cent in the previous month, exerting downward pressure on the headline print to the tune of 91 bps between these months. ICRA expects the headline WPI inflation to rise to 2.5-3 per cent in December 2024 (+0.9% in December 2023) despite a favourable base.
According to data released by the Department of Consumer Affairs, most food items experienced a rise in their year-on-year inflation rates in December 2024 (up to December 15) vis-à-vis November 2024.
Additionally, the YoY deflation in global commodity and crude oil prices has also narrowed between these months while the USD/INR pair has depreciated mildly, which would exert some upward pressure on the landed cost of imports. Looking beyond the ongoing month, the arrival of kharif crops in the market and the robust outlook for the rabi crop amid healthy sowing trends and elevated reservoir levels augur well for the food inflation outlook, Rahul Agrawal said.
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