INDIA - WPI NOVEMBER 2024

India's annual inflation rate, as measured by the Wholesale Price Index (WPI), decreased to 1.89% in November from 2.36% in October, attributed to a slowdown in food price :-

• The positive rate of inflation in November 2024 is primarily due to an increase in prices of food articles, food products, other manufacturing, textiles, machinery & equipment.

• Food inflation decelerated to 8.29% from 11.59% in October, as the increase in vegetable prices, which had previously surged by up to 63%, moderated to 28.57% during the month.

• Fuel prices declined by (-) 5.83% during the month slowing the overall rise in inflation.

• The inflation in manufactured goods edged up to 2% in November from 1.5% in October.

Impact on CPI

Wholesale price inflation also has a direct bearing on CPI inflation as cheaper wholesale prices also translate into lower retail prices.

• Official figures released last week showed that India’s retail price inflation declined to 5.48% in November as the increase in prices of food items eased during the month bringing relief to household budgets.

• The slowing inflation marks a reversal of the increasing trend in the previous two months when the inflation rate touched 6.21% in October.

RBI will find the way

The monetary policy decision maintains a delicate balance between controlling inflation and pushing up the growth rate in a slowing economy. The easing in inflation is a welcome sign as it was the first time that the rate of retail inflation crossed the RBI’s upper limit of 6% in October. The RBI is waiting for retail inflation to come down to 4% on a durable basis before it can go in for an interest rate cut to propel growth.

• The Reserve Bank of India earlier this month slashed the cash reserve ratio (CRR) for banks by 0.5% to make more funds available for lending to spur economic growth but kept the key policy repo rate unchanged at 6.5% with an eye on inflation.

• The CRR has been reduced from 4.5% to 4% which will infuse Rs 1.16 lakh crore into the banking system and bring down market interest rates.

In his last monetary policy view, former RBI Governor Shaktikanta Das said, “India’s growth story is still intact. Inflation is on the declining path, but we cannot overlook the significant risks in the outlook. This risk cannot be underestimated.”

He was optimistic about the outlook for the economy, observing that “the balance between inflation and growth is well poised".

INDIAN MONTHLY WPI DATA