India's WPI Inflation Corrected Sharply To A Lower-Than-Expected 5.8% In November; Expected To Dip Below 2% By March 2023: ICRA


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A high base, moderation in prices of some commodities as well as strengthening of the U.S. dollar/Indian rupee pair resulted in a sharper-than-anticipated cooling in the YoY wholesale price index inflation to a 21-month low of 5.8% November 2022 (our expectation: up 6.4%; up 14.9% in November 2021) from 8.4% in October 2022 (up 13.8% in October 2021).

Barring crude petroleum and natural gas, and manufactured food products, the YoY inflation for the other categories such as primary food articles, core items, etc. softened in November 2022, relative to the prior month.

In early December 2022, the prices of most food items have witnessed a sequential hardening.

Moreover, the monthly average of the U.S. dollar/Indian rupee pair has weakened, relative to November 2022, amidst foreign portfolio investment outflows from Indian equities and dollar demand from importers, which is likely to make the landed cost of imports dearer in the ongoing month.

Although global commodity prices have remained volatile, the recent correction in such prices is likely to augur well for the core-inflation.

Overall, we project the WPI inflation to print at ~5.6% in December 2022, similar to the 5.8% seen in November 2022, before easing to sub-2% by March 2023, unless commodity prices post a strong rebound.

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