WPI inflation eases to 29-month low of 1.34% in March

India’s wholesale price-based inflation eased to 1.34 per cent in March, the lowest in 29 months, as manufactured products, crude petroleum and vegetables became cheaper on year-on-year basis helped by favourable base effect.

This is the 10th straight month of decline in the Wholesale Price Index (WPI)-based inflation. The WPI inflation stood at 3.85 per cent in February and 4.73 per cent in the previous month. The sharp decline in inflation is partly due to base effects. In March 2022, the WPI inflation was at 14.63 per cent.

Manufactured products category, which has 64.2 per cent weight in WPI, witnessed deflation for the first time in nearly three years. Manufactured products became cheaper by 0.77 per cent in March when compared with the price during the same month last year, the government data showed.

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Fuel and power inflation eased to 8.96 per cent in March from 14.82 per cent in the previous month. Primary articles inflation, which has 22.6 per cent weight in WPI, declined to 2.40 per cent in March from 3.28 per cent in February.

Decline in the rate of inflation in March 2023 is primarily contributed by fall in prices of basic metals, food products, textiles, non-food articles, minerals, rubber & plastic products, crude petroleum & natural gas and paper and paper products, the Ministry of Commerce & Industry said in a statement.

The easing of WPI inflation comes in line with the decline in retail inflation. The Consumer Price Index (CPI)-based retail inflation declined to a 15-month low of 5.66 per cent in March from 6.44 per cent in the previous month.

The WPI measures the price movement of a representative basket of wholesale goods, while the CPI is based on retail price.

The Reserve Bank of India (RBI) monitors CPI-based inflation for its policy action. In its first monetary policy review of the current fiscal, the RBI decided to keep the policy repo rate unchanged at 6.5 per cent after hiking it cumulatively by 250 basis points in less than a year.

The easing in both retail and wholesale inflation will give the RBI room to maintain a pause on policy rate.

“With economic growth still looking on track, the reduction in inflation increases the headroom for policy manoeuvring,” said Mohit Ralhan, Chief Executive Officer, TIW Capital.

The negative inflation in wholesale vegetable prices and manufactured items indicates further easing of retail inflation in the coming quarter, Ralhan said.

The cumulative WPI inflation for the financial year 2022-23 declined to 9.42 per cent from 13 per cent recorded in the previous year. The month-over-month change in WPI index in March 2023 remains unchanged as compared to February 2023.

The WPI Food Index based inflation declined to 2.32 per cent in March from 2.76 per cent in February.

Potatoes became cheaper by 23.67 per cent in March on a year-on-year basis. Onion price crashed by 36.83 per cent. Overall vegetables prices declined by 2.22 per cent during the month under review. Non-food articles became cheaper by 4.63 per cent; minerals by 4.98 per cent and crude petroleum by 23.53 per cent on a year-on-year basis.