AlwaysFree: Wholesale Price Index (WPI) Eases To 29-Month Low Of 1.34% In March On Favourable Base Effect

• Among food items, although inflation for vegetables, onions and potatoes remained negative, the rate of price rise was higher than that in February.

According to The Indian Express article published on April 18, 2023, wholesale price index-based inflation fell to a 29-month low of 1.34 per cent in March due to moderation in prices of manufactured products, commodity prices and a favourable base effect, data released by the Ministry of Commerce and Industry on Monday showed.

Even though some food items showed an increase in inflation, this was the 10th straight month when wholesale inflation recorded a moderation. WPI inflation was recorded at 3.85 per cent in the previous month and 14.63 per cent in March 2022. For FY23, the wholesale inflation averaged 9.4 per cent, moderating from a 30-year high of 13 per cent in FY22.

“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 said.

This moderation is expected to ease the input cost pressures on the corporates amid weakening demand.Inflation in food articles rose to 5.48 per cent in March as against 3.81 per cent in February. Among food items, although inflation for vegetables, onions and potatoes remained negative, the rate of price rise was higher than that in February.

In the case of vegetables, it was at (-)2.22 per cent in March, higher than (-)21.53 per cent in February. In onion, inflation was (-)36.83 per cent in March, higher than (-)40.14 per cent in the previous month. Inflation in wheat and pulses was 9.16 per cent and 3.03 per cent, respectively, while in oilseeds it was (-)15.05 per cent in March 2023. The headline number is expected to post a deflation print in April.

“While a high base and the downtrend in wholesale prices of most essential commodities in early-April 2023 are likely to soften the YoY food inflation slightly, the possibility of a heatwave in the ongoing month could impart upward pressures on prices of perishables. ICRA expects the headline WPI index to record a deflation after 32 months and print at (-)0.5% in Apr 2023, on a high base (+15.4% in Apr 2022),” Aditi Nayar, Chief Economist, ICRA said.

“Going forward, Ind-Ra expects the deflationary phase to kick in from April 2023 onwards on the back of base effect and low commodity prices,” Sunil Sinha, Principal Economist, India Ratings and Research, said.

In March, the fuel and power index rose 8.96 per cent as against 14.82 per cent in February. WPI on manufactured products fell 0.77 per cent in March compared with a rise of 1.94 per cent in the previous month. The primary articles’ inflation declined to 2.4 per cent in March from 3.28 per cent in the previous month due to a deflation in crude & petroleum and non-food articles (such as fibers and oilseeds) and a drop in milk and cereals inflation. The crude petroleum prices plunged 23.5 per cent year-on-year in March. The non-food articles inflation at (-) 4.6 per cent in March was the lowest since August 2017. The cereals inflation slipped to a nine-month low of 9.5 per cent with the milk inflation moderating to 8.5 per cent in March from 10.3 per cent in February.

“The fuel & light inflation decelerated on the back of an easing in inflation of mineral oils (including petrol, diesel and air turbine fuel). The mineral oils inflation came down to 6.0% in March 2023 after remaining in double-digits for 24 successive months. On the contrary, the electricity inflation jumped to a five-month high of 22.7% in March 2023 from 19.7% a month-ago. Prices of core items (non-food and non-energy) declined after a gap of 31 months in March 2023. The inflation in core items stood at negative 0.3% in the same period. The core inflation is expected to be around negative 1.5% in April 2023,” Sinha said.

Data released last week had shown retail inflation, measured by the Consumer Price Index (CPI), having fallen to a 15-month low of 5.66 per cent in March and below the 6 per cent upper tolerance limit of the RBI after remaining above it for two months, due to moderation in prices of most items, particularly in the food basket, and a base effect.

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