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Wholesale inflation rises as fuel prices firm up

India's annual inflation, as measured by the monthly change in wholesale prices, stood at 3.39 percent for December versus 3.15…

Wholesale inflation rises as fuel prices firm up

Representational image (Photo: Getty Images)

India's annual inflation, as measured by the monthly change in wholesale prices, stood at 3.39 percent for December versus 3.15 percent in November mainly due to higher prices of fuel and metals. Costs for food items and chemical related products fell in the past month as the wider effects of demonetization made their presence felt.

A poll of analysts had expected December's wholesale inflation to come in at 3.54 percent.

December was the first full month in which the economic impact of Prime Minister Narendra Modi's move to cancel the legal tender status of the 1,000 and 500-rupee notes was visible. Modi's drive to wipe out black money in the economy by sucking out 86 percent currency in less than 2 months led to widespread disruption of supply chains, a fall in demand for everything from food items to luxury products and empty showrooms. Economic demand has since then made a modest comeback.

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Monthly inflation rose on the back of an 0.7 percent rise in the fuel and power index which has a 14.9 percent weightage in the overall calculation. Global fuel prices have been in an uptrend since November after the Organization of Petroleum Exporting Countries put in voluntary cuts to cut oversupply in the world oil market.

The benchmark tracking manufactured products rose 0.1 percent as base metal prices rose on the back of a global rally in copper, zinc and nickel metals. The sub-index of basic metals surged 0.8% to reflect the advance in prices.

The positive trend was seen in a dip in food products sub index that fell 0.2 percent mainly due to lower prices of tea leaves, coffee powder, gur, oil cakes and sugar as agricultural supply chains remained partially disturbed. However, prices of gram powder, ground nut oil and wheat flour rose within this sub index.

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