Fuel, non-food goods drive wholesale inflation to 2.4% in December

New Delhi: India's wholesale price inflation accelerated to 2.4% in December from 1.9% the previous month, driven by an increase in the cost of fuel, power and non-food articles, according to official data released Tuesday.

Inflation based on the Wholesale Price Index inflation was 0.9% in December 2023. The higher wholesale inflation contrasts with retail inflation that slowed to a four-month low of 5.2% in December, as per data released Monday.

"Fuel and power and primary non-food articles together accounted for as much as 42 basis points of the 48-basis-point increase in the headline print between these months (November and December)," said Rahul Agrawal, senior economist at ratings firm ICRA.

The base effect also contributed, said Gaura Sengupta, chief economist at IDFC First Bank. "The rise in WPI inflation has supported the rise in gross domestic product deflator growth in FY25," she added.

On an average, the wholesale price inflation was 1.7% in 2024, significantly higher than 0.1% in 2023. Inflation in manufactured goods, which have a 64.23% weight in the WPI, was 2.14% in December compared with 2% in November.

Within manufactured products, vegetable and animal oils and fats saw the highest price rise at 30.5%, followed by food products manufacturing at 9.7%.

On the other hand, fuel and power inflation decelerated to 3.8%, while primary articles inflation accelerated to 6%.

The WPI core inflation - excluding food and fuel - accelerated to a five-month high of 0.7% in December from 0.5% in November. "This was largely due to a rise in textiles inflation," said Paras Jasrai, senior economic analyst at India Ratings & Research (Ind-Ra).

Meanwhile, the WPI food inflation eased marginally to 8.89% in December from 8.92% in November.

Vegetable prices surged by 28.7% in December. Tomato inflation was at a four-month low of 5.3%, while potato and onion prices increased by 93.2% and 16.8%, respectively.

The prices of major vegetables, such as tomato, onion and potato, have declined quite sharply on a sequential basis in January so far, said Agrawal.

"However, the relatively lower weight of vegetables in the WPI than the Consumer Price Index would limit the benefits on this account to the headline WPI inflation in January. Moreover, the import duty hikes on most varieties of edible oil that were undertaken in mid-September 2024 are expected to continue to weigh on the year-on-year WPI-food inflation print in," he added.

According to Jasrai, while a seasonal correction in the price of key vegetables would help moderate food inflation, higher edible oil prices would limit the impact.