Introduction
India’s wholesale inflation rate eased to 1.89% in November, down from 2.36% in October, according to the latest data. This decline was driven by a drop in food prices, especially vegetables, offering a breather from the inflationary pressures seen in recent months.
Key Drivers Behind the Decline
1. Seasonal Food Supplies Bring Relief
- Food Inflation: The WPI-Food index dropped to 8.92% in November from 11.59% in October.
- Vegetable Prices: Vegetable inflation showed a sharp decline, falling to 28.57% from 63.04% in October, attributed to the arrival of seasonal produce.
- Specific Items:
- Potato inflation remained high at 82.79%.
- Onion inflation moderated significantly to 2.85%.
2. Manufactured Goods and Fuel Trends
- Inflation in manufactured goods worsened slightly to 2.0% in November, reflecting higher production costs.
- The ‘fuel and power’ category saw continued deflation, with prices declining by 5.83% compared to 5.79% in October, signaling stability in energy costs.
Consumer Inflation and RBI’s Response
The easing of wholesale inflation complements the recent drop in consumer inflation to 5.48% in November from 6.21% in October. This cooling trend allows the Reserve Bank of India (RBI) room to maneuver its monetary policy to foster growth.
In its December review:
- The RBI maintained the repo rate at 6.5% to curb inflation.
- It cut the cash reserve ratio (CRR) by 50 basis points in two phases to inject liquidity worth₹1.16 lakh crore into the banking system, aiming to stimulate lending and economic activity.
RBI Leadership Transition
The monetary policy landscape has also seen a leadership change, with Sanjay Malhotra assuming office as the 26th RBI Governor. His first bimonthly policy review is scheduled for February, which will likely focus on sustaining inflation control while boosting economic growth.
Conclusion
The easing of wholesale inflation is a positive sign for the economy, providing both consumers and policymakers with relief from rising prices. However, challenges remain, particularly in manufacturing costs and certain food categories. The RBI’s balance act between inflation control and economic stimulus will be closely watched in the coming months.
