Wholesale inflation narrows to -0.32% in November as deflationary pressures ease

India's wholesale price inflation saw a smaller decline in November, registering -0.32% compared to -1.21% the previous month. This suggests that deflationary pressures are beginning to weaken, even though many commodities continue to show weakness.

The latest figures represent a move away from October's 12-month low in the Wholesale Price Index (WPI).

The primary driver behind the WPI increase was a slower rate of decline in primary articles, particularly food items, after significant price drops in previous months. While wholesale prices remain in negative territory, the November data indicates that the most intense period of deflation may be over.

Food Price Declines Soften

Food prices continued to be a major drag on wholesale inflation, although the rate of decrease has lessened. The food index remained in contraction, but the rate of decline narrowed as vegetable prices stabilized following earlier sharp drops.

While vegetable prices were still more than 20% lower than the previous year, this was a notable improvement from October, when prices had fallen by almost 35%.

Onion and potato prices remained significantly lower than a year ago, reflecting abundant supplies and favorable base effects.

Cereals, which had previously contributed to inflation, moved into negative territory in November. Wheat prices, after remaining high for much of the first half of the year, also turned slightly negative. Pulses continued their deflationary trend, which began in early summer, due to increased availability and reduced procurement pressures.

Non-Food Articles Offer Support

Non-food primary articles provided some counterbalance. Oilseed prices increased sharply in November due to supply constraints and strong global cues, pushing inflation in this sector close to double digits.

Mineral inflation also rose, reflecting price pressures in certain construction and industry-related inputs.

Fuel and Manufacturing Remain Subdued

Fuel and power inflation remained negative for another month, although the rate of contraction moderated.

Crude petroleum and natural gas prices continued to fall year-on-year, in line with global oil trends, while petrol and diesel remained cheaper than a year ago.

Inflation in manufactured goods, which account for the largest portion of the WPI, eased slightly. Price pressures in manufactured food products cooled significantly, falling below 1% after remaining in the high single digits earlier in the year.

Edible oils also experienced a significant slowdown after strong gains in the first quarter. Core manufacturing categories, such as chemicals, pharmaceuticals, textiles, and basic metals, showed only modest increases or slight deflation, indicating limited cost-push pressures.

Benign Price Outlook

With retail inflation also remaining unusually low – below 2% in recent months – the easing of wholesale deflation supports expectations that overall price pressures are currently well contained. This gives policymakers room to maintain an accommodative stance, even as global conditions remain uncertain.