Annual inflation based on the wholesale price index (WPI) eased in November to a 21-month low of 5.85 per cent from a peak of 16.63 in May as food and vegetable prices moderated with the arrival of winter.

Energy and manufactured product prices also cooled down, hinting that a spike in input costs for companies because of the Ukraine conflict is now easing. The latest print was the lowest since February 2021, when the WPI rate touched 4.83 per cent. Economists said the base effect coupled with the softening of commodity prices would help wholesale inflation to moderate further and go below 5 per cent in December.

However, there were many key items which reported high inflation: such as cereals, milk and milk products, crude petroleum and natural gas. Sunil Kumar Sinha, principal economist, India Ratings & Research, said: “While cereals inflation firmed up to a 112- month high of 12.9 per cent, milk and milk products inflation edged up to a five-month high of 6 per cent. Even prices of crude and natural gas rose by a steep 48.2 per cent, reversing the deceleration trend observed since May 2022.”

Madan Sabnavis, chief economist, Bank of Baroda, said: “There is an uptick in prices of wheat, pulses and milk products. With the Russian Federation rejoining the Black Sea Grain initiative, wheat prices are expected to see some volatility in the coming months.” Core WPI softened to a two-year low of 3.5 per cent in November from 4.7 per cent in October owing to a dip in manufactured inflation to 3.6 per cent from 4.4 per cent.

Fuel inflation also fell. “Going ahead, we expect further easing in WPI inflation,” Sabnavis said.

WPI inflation has been on a declining trend since May and came down to a single digit in October at 8.39 per cent. “Decline in the rate of inflation in November is primarily contributed by a fall in prices of food articles, basic metals, textiles, chemicals and chemical products and paper and paper products compared with the corresponding month of the previous year,” the commerce ministry said.

While inflation in food articles in November was 1.07 per cent against 8.33 per cent in the previous month, inflation in vegetables was (-)20.08 per cent during the month compared with 17.61 per cent in October. In the “fuel and power” basket, inflation was 17.35 per cent, while in manufactured products, it was 3.59 per cent.

The Reserve Bank takes into account retail inflation for formulating its monetary policy. Data released earlier this week showed retail inflation falling below the RBI’s tolerance level of 6 per cent for the first time in 11 months in November. Though retail inflation based on the consumer price index (CPI) declined to 5.88 per cent in November, experts still expect the RBI to hike interest rates by another 25 basis points in February.