India's wholesale price index (WPI) rate of inflation moderated in November to under 2%, with official figures released Monday indicating an on-year inflation rate of 1.89%. This marked a decrease from the 2.36% on-year rate recorded in October, as reported by the Ministry of Commerce and Industry (MCI).
On a month-on-month basis, the WPI saw a slight decline of 0.06% from October. The WPI gauges the price of products sold between businesses, focusing on bulk sales at the factory gate or between distributors, setting it apart from the consumer price index (CPI), which measures prices within retail settings. Driving the WPI upward in November were food prices, which rose by 8.92% year over year.
Additionally, primary articles witnessed a 4.59% increase, while manufactured products climbed by 2%. In contrast, fuel and power prices dropped by 5.83% at the wholesale level for the same period. India's economic landscape, similar to many other nations, has dealt with inflationary pressures during and in the wake of the pandemic.
The WPI reached a peak inflation rate of 16.63% in May 2020 before experiencing a brief period of deflation in 2023. In the current year, the WPI has fluctuated between near zero and 3.43% on a year-over-year basis. Wholesale prices serve as a precursor to future trends in the CPI, as retailers seek to adjust prices based on their costs or potential savings passed onto consumers.
The Reserve Bank of India aims for a CPI inflation target of 4%, within a band of plus or minus 2%. In early December, the Reserve Bank opted to maintain its key policy rate at 6.5%, marking the 11th consecutive meeting without a change. Meanwhile, India's CPI recorded a 5.48% increase year over year in November, remaining on the higher end of the central bank's target range.
It remains uncertain whether the recent cooling in wholesale prices will result in reduced consumer expenses in the months to come..