Government data released on Monday indicated that India’s wholesale price inflation remained in negative territory for the second straight month in November, reinforcing signs of easing price pressures in the economy. The Wholesale Price Index (WPI) inflation stood at minus 0.32 per cent in November, an improvement from minus 1.21 per cent recorded in October. In contrast, wholesale inflation during the same month last year was significantly higher at 2.16 per cent, highlighting the sharp moderation in prices over the past year.
Although some food items, particularly pulses and vegetables, witnessed a month-on-month increase in prices, this did not materially alter the overall trend of subdued wholesale inflation. The data suggest that broader price movements across key commodities continued to keep inflationary pressures in check.
According to the Ministry of Commerce and Industry, the persistence of negative wholesale inflation in November was largely driven by lower year-on-year prices in several major categories. These included food articles, mineral oils, crude petroleum and natural gas, basic metals, and electricity. Together, these components played a crucial role in offsetting price increases elsewhere and maintaining overall wholesale inflation in the deflationary zone.
Food articles, in particular, have been experiencing deflation for eight consecutive months, beginning in April. However, the intensity of this deflation moderated notably in November. Food inflation improved to minus 4.16 per cent, compared to a much sharper contraction of minus 8.31 per cent recorded in October, indicating that while prices were still lower than last year, the rate of decline had slowed.
Within the food basket, vegetables continued to remain cheaper on a year-on-year basis, registering deflation of 20.23 per cent in November. This was, however, a significant moderation from the steep 34.97 per cent decline seen in the previous month. Pulses also remained in deflation at 15.21 per cent. Prices of key vegetables such as potatoes and onions fell sharply compared to last year, with potato prices down by 36.14 per cent and onion prices plunging by 64.70 per cent.
Trends in other major components of the WPI also reflected subdued inflationary pressures. Inflation in manufactured products eased slightly to 1.33 per cent in November from 1.54 per cent in October, indicating some softening in factory-gate prices. The fuel and power category continued to remain in deflation at minus 2.27 per cent, although this was marginally higher than the minus 2.55 per cent recorded a month earlier.
Commenting on the data, ICRA Chief Economist Aditi Nayar said that wholesale price deflation narrowed faster than anticipated, aided by favourable base effects, a weaker rupee, and rising prices of certain commodities. She added that these factors could push WPI inflation back into positive territory in December, with an estimated reading of around 0.5 per cent.
From a policy perspective, the sustained period of low inflation has had important implications for monetary policy. Retail inflation, measured by the Consumer Price Index (CPI), rose to 0.71 per cent in November from a record low of 0.25 per cent, primarily due to an uptick in food prices. Despite this increase, overall inflation levels have remained well within comfortable limits.
This benign inflation environment has provided the Reserve Bank of India with sufficient space to ease monetary policy. Over the course of the year, the central bank has reduced interest rates by a cumulative 1.25 percentage points. Earlier this month, the RBI cut the policy repo rate to 5.25 per cent and lowered its inflation projection to 2 per cent, describing the current situation as an unusual but favourable combination of strong economic growth alongside historically low inflation.
