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WPI inflation down to 6.16% in December as veggies become cheaper

New Delhi, January 15 (Online Bureau & Reuter): Wholesale inflation declined to 6.16 per cent in December 2013, from 7.52 per cent in November, as vegetables became cheaper.

According to data released by the government, the wholesale price index for all commodities, considered the benchmark inflation, was 179.2 (provisional) in December against 181.5 per cent the previous month.

Inflation for primary articles declined in December by five per cent, led by food articles, and followed by non-food articles.

Prices of vegetables fell by nearly 30 per cent from November levels, bringing down overall food inflation for December to 13.68 per cent, from 19.93 per cent in November.

The index for the fuel and power group increased marginally, as electricity for industry became costlier. Some items powering the increase were electricity, LPG, high-speed diesel, aviation turbine fuel.

The index for manufactured products, another major group, remained unchanged at November’s level of 151.6.

On Monday, the government said consumer inflation had eased to a three-month low of 9.87 per cent in December.

The latest inflation numbers are expected to give the Reserve Bank of India (RBI) some leeway to keep interest rates on hold at its policy meeting scheduled for January 28.

“The WPI data has surprised on the downside and seen in conjunction with the CPI (consumer price index) data should strengthen the case for a rate pause in the Jan review,” said A. Prasanna, an economist at ICICI Securities primary dealership Ltd.

But what could worry new RBI chief Raghuram Rajan is a pick up in core WPI inflation, which inched up to around 2.8 per cent last month from 2.66 per cent in November. Already, core CPI inflation is hovering around 8 per cent for the past three months, a level Rajan deems as uncomfortably high.

“The moderating headline retail and wholesale inflation has definitely increased the likelihood of RBI maintaing a status quo in its January meeting,” said Upasna Bhardwaj, an economist at ING Vysya Bank.