Wholesale Inflation Surges to 2.37% in December 2024 Despite Lower Food Prices
India’s wholesale inflation rate (Wholesale Price Index – WPI) climbed to 2.37% in December 2024, up from 1.89% in November. This unexpected rise occurred despite a decline in food prices. According to the Ministry of Commerce, this marks the fifth time in FY 2024-25 that WPI inflation exceeded 2% even as food costs eased.
Retail Inflation Shows a Contrasting Trend
In contrast, retail inflation eased to a four-month low of 5.2% in December. Food inflation in retail dropped below 9% for the first time, settling at 8.4%, highlighting a stark divergence between wholesale and retail inflation trends.
Key Drivers of Rising Wholesale Inflation
The price surge in key commodities contributed significantly to the December inflation spike:
- Potatoes: Wholesale prices soared by a staggering 93.20% year-on-year.
- Other Vegetables: Prices increased by 28.65%.
- Onions and Fruits: Recorded price hikes of 16.81% and 11.16%, respectively.
- Wheat and Rice: Wholesale inflation for wheat rose by 7.63%, while rice increased by 6.93%.
Manufacturing’s Role in Inflation
The Ministry of Commerce attributed the rising WPI inflation primarily to the manufacturing sector. In December 2023, WPI inflation stood at 0.73%, driven by sharp increases in the prices of vegetables and pulses. In December 2024, manufacturing inflation grew from 2% in November to 2.14%, exacerbating the overall inflationary pressure.
Energy and Raw Material Costs
While fuel prices saw a decline of 3.79% in December (compared to a 5.83% drop in November), the reduced dip in energy costs failed to offset the price increases in other categories. For instance:
- Food Products: Wholesale prices fell by 3.08%.
- Crude Oil and Natural Gas: Prices dropped by 2.87%.
- Non-Food Items and Minerals: Prices rose month-on-month by 2.53% and 0.48%, respectively.
Economic Implications of Rising Inflation
The uptick in wholesale inflation presents challenges for policymakers balancing economic growth with price stability. Industries reliant on raw materials, such as manufacturing and energy-intensive sectors, are likely to feel the impact of elevated costs. Meanwhile, rising prices of staples like potatoes, onions, and cereals could strain household budgets.
Conclusion:
Despite easing food inflation in retail, the persistent rise in WPI highlights structural inefficiencies and supply chain bottlenecks. Policymakers must address these challenges while leveraging technological solutions to monitor price fluctuations more effectively. As businesses and consumers navigate this volatile environment, staying informed about market trends and inflationary pressures remains critical.
Sources for More Insights:
- Explore global economic inflation data: World Bank Economic Indicators
- Compare India’s inflation trends: Trading Economics – India Inflation
- Access detailed inflation analysis: OECD Economic Outlook