India: Consumer inflation continues to accelerate in December; wholesale inflation softens
Consumer prices eased 0.29% from the previous month in December on the back of seasonal month-on-month decreases in fruit and vegetable prices. The decline in prices contrasted the 1.10% surge recorded in November—largely driven by unseasonal weather—and marked the largest monthly drop in a year.
In spite of the monthly drop, inflation continued its upward trend in December, accelerating from 4.9% in November to a year-and-a-half high of 5.2% and coming in slightly above market expectations of 5.1% inflation. The month-on-month decline in vegetable prices usually seen around this time of the year was much weaker in December, which pushed food inflation to 4.9% from 4.4% in November. Transport price pressures remained weak, with domestic fuel prices steady despite a pick-up in global oil prices.
Core inflation, which excludes food and energy products, also picked up to 5.2% in December from 4.9% in November on the back of stronger housing inflation caused by the impact of the central government’s house rent allowance (HRA) hike. Conversely, core pressures related to the implementation of the Goods & Services Tax (GST) started to wane, partially reflecting the reduction in rates approved at the November GST council meeting.
The wholesale price index (WPI) declined 0.52% from the previous month in December, contrasting the 0.69% increase recorded in November. As a result, wholesale price inflation eased from 3.9% in November to 3.6% in December, largely reflecting softer price pressures on food articles—mainly in the vegetables and eggs, meat and fish sub-categories. Manufacturing and fuel inflation, however, accelerated from the previous month in December and partially offset softer food inflation. Annual average wholesale inflation hit a fresh three-year high of 3.4% in December, up from 3.3% in November.