Wholesale inflation declined to a 22-month low of 4.95 per cent in December because of a fall in the prices of food articles, especially vegetables and oilseeds.

The wholesale price index (WPI)-based inflation was 5.85 per cent in November and 14.27 per cent in December 2021.

While primary articles inflation declined to a 23-month low of 2.4 per cent, manufacturing inflation edged down to a 25-month low of 3.4 per cent. The drop in primary articles was largely on account of a massive decline in the prices of vegetables at 36 per cent, owing to seasonal factors.

Sunil Sinha, principal economist, India Ratings & Research, said despite the category of food article witnessing deflation in December, there are concerns emerging on the food front. Cereals in December witnessed the fifth consecutive month of double digit inflation.

“Except paddy and ragi all other cereals are witnessing double digit inflation on a sustained basis. The manufacture of grain mill products such as maida, atta and basmati rice a reached a 113-month high of 14.3 per cent in December,” Sinha said.

Milk inflation firmed up to a 92-month high of 7 per cent, taking inflation in dairy products to a 100-month high of 14.4 per cent.

RBI stand

Though the Reserve Bank of India (RBI) tracks retail inflation in its monetary policy decision, economists said that the easing of WPI reflects the trend in commodity prices, and if this sustains finished product prices could also soften. Yet, some feel that the price challenge may not be over for the RBI.

"With decline in global commodity prices, WPI was due to decline. However, fruits and vegetable prices declining very sharply over the past couple of months has aided the decline in WPI inflation. From an input cost perspective, this is a big positive and for now, this decline is likely to continue; assuming global scenario remains benign,” Suvodeep Rakshit, senior economist at Kotak Institutional Equities, told The Telegraph.

The RBI has hiked the policy repo rate 225 basis points since May, and the headline inflation numbers have for the past two months come below its upper bound of 6 per cent. Analysts feel inflation is on a downward trajectory that this will prompt the apex bank to go for one more 25 basis point hike in February, before going on a pause.

22-month low

■ Wholesale inflation at 4.95% in December

■ Primary articles inflation down to 2.4%

■ Manufacturing inflation falls to 3.4%

■ Primary articles inflation fell because of a drop in vegetable prices