New Delhi: With prices of food items, especially vegetables and onions falling, India’s wholesale price index or WPI-based inflation fell to a three-month low of 1.89 percent in November, from 2.36 percent in October, while WPI-based inflation. Inflation was 0.39 percent in November last year, government data showed on Monday.
With prices falling, financial experts expect the central bank to cut interest rates by at least 0.25 percent in the upcoming February policy review. According to data from the Ministry of Commerce and Industry, inflation in food items fell to 8.63 percent in November, which was 13.54 percent in October.
“This decline is due to a drop in vegetable inflation to 28.57 percent as against 63.04 percent in October. However, potato inflation remained high at 82.79 percent while onion prices fell to 2.85 percent in November, the ministry said.
“Fuel and power category recorded deflation of 5.83 percent in November, as against 5.79 percent in October, while inflation of manufactured goods was 2 percent in November, as against 1.50 percent in October,” the ministry added.
The Center earlier this month appointed former revenue secretary Sanjay Malhotra as the new RBI governor, while in October the government reconstituted a six-member monetary policy panel. However, experts say that there will be some reduction in interest rates in the upcoming monetary policy meeting.
“Moderation in WPI inflation was mainly led by primary food items, which fell to a three-month low of 8.6 percent from 13.5 percent in the previous month, adding downward pressure to the headline print to the tune of 91 bps between these months,” said Rahul Agarwal, senior economist at ICRA Ltd.
“Looking beyond the current month, the arrival of kharif crops in the market and a strong outlook for the rabi crop amid healthy sowing trends and high reservoir levels will improve the outlook for food inflation,” Agrawal said.
In a research note, Barclays also said that wholesale price inflation softened in November, due to lower primary food inflation, which more than offset higher inflation seen in manufactured goods. “Through December, global prices are up 0.7 percent and December WPI inflation is likely to be higher,” Barclays said.