Mr Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research comments on WPI Nov'21
"The WPI print for Nov-21 clearly highlights the underlying inflationary pressures in the economy that is not apparent in the headline CPI print. While the wholesale inflation had declined to 10.66% YoY in Sep-21, it climbed back to 12.54% YoY in Oct-21 and further to 14.2% in Nov-21, the highest level seen in the current year. This wholesale pricing pressure is also reflected in a strong sequential rise of 2.7% in the index.
There has been a steep sequential rise in inflation of primary articles and fuel and power which stood at 5.6% for both categories which clearly reflects the continuous rise in commodity prices including oil, coal and that of various metals. As seen in headline CPI, there has been a visible spurt in primary food articles due to the rise in vegetable prices; however, we believe this is likely to be transient in nature due to the arrival of the kharif crop in the market. While the pass through of higher input costs to manufactured products has evidently continued in Nov-21, the sequential growth is currently benign at 0.82% for that category due to the moderate extent of demand recovery.
Acuité expects a further pass through of input costs in manufactured goods as demand continues to improve. WPI core inflation (non-food manufacturing inflation) is estimated to have increased to 12.3% YoY in Nov-21 from 11.9% YoY in Oct-21, with a higher sequential rise of 1.2%, reflecting increasing risks of pass through. We expect continuing supply side bottlenecks, raw material shortages and high commodity prices to maintain the core inflation at such high levels."