ICRA expects WPI inflation to rise above 4.0% in December

India's annual wholesale price inflation rose to an eight-month high at 3.93% in November up from 3.59% in October, said the government data released on Thursday.

In reaction to the WPI inflation data ICRA said, "the sequential uptick in the WPI inflation to the eight month high 3.9% in November 2017 was led by primary food items and core inflation, as well as a lagged correction in crude oil and minerals.
 
The spike in vegetable prices led by onions and tomatoes was the chief factor that pushed up the primary food inflation to the 16 month high 6.1% in November 2017. While vegetable prices may ease on a month-on-month basis going forward, primary food inflation on a YoY basis is nevertheless expected to rise further in the next two months, on account of the base effect related to the drop in vegetable prices from December 2016-February 2017. 
 
Rising commodity prices resulted in an uptick in inflation for minerals, crude petroleum as well as some sub-sectors of non food manufactured products in November 2017.  
 
Core inflation is expected to remain sticky above 3.0% in the remainder of FY2018. Elevated crude oil prices are likely to impart some firmness to the WPI inflation in the ongoing month. 
 
Overall, we expect the WPI inflation to rise further to above 4.0% in December 2017, before easing to a range of 3.2% to 3.5% in Q4 FY2018, benefiting from the base effect. 
 
As anticipated, a sharp wedge has reopened between the CPI and the WPI inflation following the considerable hardening in the former in the month of November 2017.