India’s wholesale price index-based inflation accelerated to 0.53 per cent in March on an annual basis, its highest level in three months, as against 0.20 per cent in February, data from the Commerce Ministry on Monday showed.
Wholesale onion prices quickened by 56.99 per cent in March after rising 29.22 per cent in February.
According to industry representatives, India is expected to face a major shortage in onion supply until it harvests the next kharif crop marking a reversal from the current scenario with the country facing a glut in supplies of the bulb vegetable and stable prices amid an export ban.
Moreover, WPI for potatoes accelerated by 52.96 per cent in March after rising 15.34 per cent in February.
Wholesale prices of onions had contracted by 36.83 per cent and potatoes by 25.59 per cent in the same month a year ago, data shows.
The month-over-month change in WPI index for the month of March, 2024 stood at 0.40 per cent as compared to February, 2024.
Wholesale food inflation quickened to 4.7 per cent on an annual basis after rising 4.1 per cent in February. On a MoM basis, food inflation grew 1.01 per cent after growing 0.11 per cent in February.
Positive rate of inflation in March, 2024 is primarily due to increase in prices of food articles, electricity, crude petroleum & natural gas, machinery & equipment and other manufacturing etc, the press release said.
Wholesale inflation in crude petroleum and natural gas grew 4.87 per cent in March as against a contraction of (-) 1.19 in the same month last year.
For the primary articles segment, the inflation rate in March surged to 4.51 per cent from 4.49 per cent in the preceding month.
The core inflation rate stood at -1.2 per cent in March in comparison to February’s figure of -1.3 per cent.
Manufactured product prices fell 0.85% against a 1.27% drop in the previous month. Fuel and power prices fell 0.77% compared with a 1.59% drop in February.
“With the fading of a supportive base, it is anticipated that the WPI inflation will edge up in the upcoming months. The recent increase in global commodity prices, particularly driven by higher Brent crude prices and a rise in industrial metal prices, is expected to add to upward pressures on WPI,” said Rajani Sinha, Chief Economist at CareEdge.
“However, it’s worth noting that expectations of a normal monsoon with waning El Nino conditions and a recovery in rabi sowing paint a positive outlook for agricultural production and, consequently, food inflation. This is anticipated to cushion the WPI prints to a certain extent,” Sinha added.
Last week, India’s retail inflation data was released which showed that it eased to 4.85 per cent on an annual basis in March as against 5.09 per cent in the previous month.
RBI’s inflation forecast:
The Reserve Bank of India (RBI) in April MPC meeting left its inflation forecast for this fiscal year unchanged at 4.5 per cent and hinted at inflation target being in sight, even as the country braces for a scorching summer amid a spike in crude oil prices and persisting worries about supply chain due to the Red Sea crisis.
The central bank had characterized inflation as the prominent challenge, referring to it as “the elephant in the room.” Governor Das indicated optimism by suggesting that inflation (elephant) appears to be reverting to the desirable threshold (forest) of 4 per cent.
During his address, Governor Das remarked, “The elephant in the room was CPI inflation. The elephant has now gone out for a walk and appears to be returning to the forest.”
Das highlighted the downward trajectory of inflation, underpinned by favorable base effects. However, he acknowledged the persistent pressure from service prices which has sustained the key indicator at a heightened level compared to the stipulated targets.
However, it’s worth noting that expectations of a normal monsoon with waning El Nino conditions and a recovery in rabi sowing paint a positive outlook for agricultural production and, consequently, food inflation. This is anticipated to cushion the WPI prints to a certain extent.
