Wholesale Inflation Hits Eight-Month High at 0.83% in December

Wholesale price inflation in India turned positive at 0.83% in December, for the first time in two months, and a significant improvement from the 0.3% contraction recorded in November, as shown in government statistics released on January 14, 2011. This shift is a sign that the "softness" of commodities is starting to give way to firm prices over time. 
The increase seen in wholesale price inflation corresponds to an overall increase seen in retail price inflation. Retail price inflation reached a three-month high of 1.33% in December, while remaining below the Reserve Bank of India's target band of between 2%-6% for four consecutive months, as well as falling to an average of 0.6% for 2025, dramatically down from an average of 1.74% for 2024.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Drivers of the Inflation Rebound

Price stabilisation for commodities has ended the deflationary period wholesale price inflation has experienced over the last year. Having been in a long period of stabilised through deflationary pressures, wholesale price inflation has capacity for growth moving forward from December, as seen in the greater level of momentum.
Retail inflation has also increased to greater than 1% after dipping lower, maintaining low relative to the previous month. Thus this correlation/relation between retail inflation figures will continue as there is evidence of broad based reductions in cost pressures both for the drive for the production of goods and for the price to the consumer of goods being produced.

Inflation Framework Updates Ahead

January's Consumer Price Index (CPI) will use a new 2024 base year, with data to be released on February 12, and the Wholesale Price Index (WPI) is planned to be rebased. The purpose of both these changes is to provide a more accurate measure of the ever-changing economy and economy-wide inflationary trends.
The government is also studying the possibility of changing from the WPI to a Producer Price Index (PPI) to better align with international standards and reporting practices, and to help produce more accurate economic indicators for decision makers as well as the markets.