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Wholesale Price Index-based Inflation (WPI) for December moderated slightly compared with November, but stayed in double digits for the ninth consecutive month, data released by the Commerce Ministry showed on Friday.

inflation bucked a 4-month rising trend in December 2021 and came in at 13.56 percent, even though food prices hardened. Factory-gate infInflation in November was 14.23 per cent, while in December 2020 it was 1.95 per cent.

“The high rate of inflation in December 2021 is primarily due to rise in prices of mineral oils, basic metals, crude petroleum & natural gas, chemicals and chemical products, food products, textile and paper and paper products etc as compared to the corresponding month of the previous year,” the Commerce Ministry said.

food inflation rose to a 23-month high of 9.56 per cent in December, against 4.88 per cent in November. Vegetable price rise rate jumped to 31.56 per cent, against 3.91 per cent in the previous month.

“The primary food inflation has spiked from the marginal 0.1 percent in October 2021 to an unpleasant 23-month high in December 2021, reflecting the unfavourable base particularly for vegetables. Even as global commodity prices corrected on account of the impact of Omicron, domestic producers undertook price increases in various sectors to protect margins against the cumulative impact of the rise in input costs,” said Aditi Nayar, Chief Economist with ICRA Ltd.

“Notwithstanding the continued double-digit inflation in December 2021, we expect the MPC to pause in February 2022. Once normalisation commences, we subsequently expect two repo rate hikes of 25 bps each, followed by a pause to reassess the durability of growth,” Nayar said.

The Reserve Bank of India (RBI) is slated to announce its monetary policy on February 9.

Sunil Kumar Sinha, Principal Economist with India Ratings, said that part of the reason for the rise in fruits & vegetables inflation is supply disruption caused by excess rains in the southern parts of the country. In addition, cereals inflation rose to 5.1 percent in December, a 22-month high. Edible oils inflation despite some easing is at elevated levels of 16.84%, Sinha said.

“Fuel prices in the international markets somewhat softened due to the concerns over the spread of Omicron but Brent crude at $74.22/barrel in December 2021 is still keeping the fuel cost in the India market high,” Sinha said.

Sinha said that going forward, fuel prices are expected to stay at the elevated levels. “Flare up in COVID cases due to the Omicron variant will jeopardise the normalisation of global supply chains with an upward pressure on transportation and distribution costs. Against this backdrop, we expect the wholesale inflation to be in double-digits in rest of the fiscal,” he said

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