After consumer’s inflation, producer’s inflation, too, registered a decline in December. However, Core Inflation (Inflation excluding volatile items such as food and fuel) remained very high dousing any possibility of policy interest rate revision.
Rate of producer’s inflation based on Wholesale Price Index (WPI) stood at 1.22 per cent in December as against 1.55 per cent in November. This dip was mainly triggered by primary food items which saw a disinflation of 1.61 per cent. Fuel & power group was also in negative zone with wholesale inflation rate at 8.72 per cent.
Rate of retail inflation based on Consumer Price Index (CPI) for the month of December dipped to 4.59 per cent.
Aditi Nayar, Principal Economist with ICRA said that the headline WPI inflation recorded a pullback in December 2020 driven by a disinflation in primary food items and lower inflation for primary non-food articles, even as core inflation spiked to a 24-months high 4.2 per cent, injecting concern regarding the trajectory of the WPI going forward.
The sharp 1.5 per cent rise in the core-index in month-on-month terms, partly reflects higher commodity and metal prices, as well as a rise in pricing power, in line with the revival in global demand with the Covid-19 vaccines roll out.
“The surge in the core-WPI inflation has completely doused any lingering hope that the dip in the December 2020 CPI inflation would be adequate for rate easing to recommence in the upcoming policy review,” she said.