The wholesale price index (WPI)-based inflation rate fell to a 29 month low of 1.34 per cent in March, from 3.85 per cent in February, pulled down by a higher base effect and a decline in the prices of manufactured products.
The factory gate inflation was 14.63 per cent in March 2022. It was for the sixth consecutive month that wholesale inflation was down to single digits, after remaining in double digits for 18 months. It was 2.29 per cent in November 2020.
Rajani Sinha, Chief Economist at CARE ratings said manufactured products have seen a deflation for the first time in about three years, largely due to lower textile and metals prices.
“However, there has been uptick in food prices, somewhat offsetting the lower prices of fuel, power and manufactured products,” he added.
Data released by the Ministry of Commerce and Industry on Monday showed that prices for manufactured items shrank to 0.77 per cent in March from 1.94 per cent in February, led by a slower price rise in items like chemicals, pharmaceuticals and cement, and a dip in the prices of manufactured food products (-2.96 per cent), paper (-1.01 per cent) and wood (-0.83 per cent).
Also, the decline in prices continued in textiles (-4.93 per cent) and fats (-21.33 per cent).
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However, food inflation excluding manufactured food items, rose to 5.48 per cent in March from 3.81 per cent in February. This was led by price rise in pulses (3.03 per cent) and only a marginal contraction in the prices of vegetables (-2.2 per cent). On the other hand, prices of cereals (9.48 per cent), paddy(7.54 per cent) wheat (9.16 per cent), milk (8.48 per cent) and fruits (4.89 per cent) decelerated in March.
Besides, fuel inflation eased to 8.96 per cent in March from 14.82 per cent in February. It was led by deceleration in prices of petrol (6.48 per cent) and high-speed diesel (11.85 per cent). However, after contracting for four straight months LPG prices rose by 3.31 per cent in March.
The fall in WPI comes after retail inflation declined to 5.66 per cent in March, coming below the central bank’s upper tolerance limit of six per cent for the first time in 2023.
In April, the six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) unanimously decided to keep the policy repo rate unchanged at 6.5 per cent but declined to concede that the rate cycle had peaked.
Although the RBI tracks retail inflation for its monetary policy decisions, easing wholesale price inflation may lead to expectations of a fall in retail inflation in the coming months.
The divergence between retail and wholesale price inflation has now increased to 423 basis points (bps) in March from a meagre 24 bps in November.
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