WPI Inflation Data for December 2024 :There has been worrying news on the inflation front.The country’s wholesale inflation rate (WPI) increased to 2.37% in December 2024, which was 1.89% in November 2024. This increase is mainly due to increase in the prices of manufacturing goods, although some softening was seen in the prices of food items. Although the inflation target of the Reserve Bank of India (RBI) is linked to the retail inflation (CPI Inflation), there is a possibility of increasing pressure on retail prices in future due to increase in wholesale inflation rate.
Rise in prices of manufacturing goods
The inflation rate of manufacturing products was 2.14% in December, which was 2% in November. The manufacturing sector contributes about 64% to the WPI, hence inflation in this sector had a major impact on the overall inflation rate.
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Reduction in inflation of food items
The inflation rate of food items decreased to 8.47% in December, which was 8.63% in November. However, vegetable prices continued to rise. The inflation rate of potato remained at 93.20% and the inflation rate of onion increased to 16.81%. At the same time, a slight softening was seen in the inflation rate of essential commodities like grains, pulses and wheat.
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Relief in fuel and electricity prices
In the fuel and electricity category, a decline of 3.79% was recorded in December, which was 5.83% in November. Due to this decline, the wholesale inflation rate remained under control to some extent.
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Relief from decline in retail inflation rate
The wholesale inflation rate may have increased, but it is a matter of relief that in December 2024, the country’s retail inflation rate (Retail or CPI Inflation) came down to 5.22%, which is the lowest level in the last four months. This decline has come due to softening of prices of food items in the retail market. This rate is lower than the RBI’s upper tolerance level of 6 percent on inflation, but it is still higher than its target of limiting retail inflation to 4 percent.
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What will be the impact on RBI’s monetary policy?
Due to the softening of retail inflation last month, it was expected that the pressure on the Reserve Bank of India (RBI) to cut interest rates may increase during the monetary policy review to be held in February. However, retail inflation is still above the target given by the government to the RBI to keep the inflation rate below 4 percent. But due to concerns related to increasing the growth rate, the possibility of softening of interest rates was being expressed. The country’s economic growth rate has come down to 6.4% in 2024-25, which is the lowest in the last four years. In such a situation, what changes the Reserve Bank of India (RBI) makes in its monetary policy in the coming time will largely depend on the inflation situation in the country.
