India’s wholesale price rise slowed to 1.34% in March, marking the most benign inflation rate since October 2020, with manufactured products prices falling nearly 0.8% from a year ago — when overall wholesale inflation was at 14.5%.
Aided significantly by base effects, this was the tenth successive month that wholesale inflation has cooled after scaling a record high of 16.6% in May 2022. Inflation measured by the Wholesale Price Index (WPI) stood at 3.85% in February 2023.
Also read: Wholesale inflation eased to 4.7% in January
While the Wholesale Food Index saw a slight reduction from the 2.8% uptick in February to 2.3% in March, primary articles inflation eased from 3.3% to 2.4% last month. Fuel and power inflation cooled from 14.8% in February to 9% in March, making this the first instance in two years that fuel and power price rise dropped below 10%.
Bucking the overall trend, however, inflation in Food articles accelerated to a five-month high of 5.5% in March, from 3.8% in February. Cereals and wheat inflation, despite cooling to multiple-month lows, remained sticky at 9.5% and 9.2%, respectively. Paddy prices rose 7.5% in March, the second highest pace in the last six months.
Vegetables prices continued to fall for the fifth month in a row, but the contraction from a year ago dropped to 2.2% in March from 21.5% in February. Sequentially, vegetable prices were up 5.5% during the last month from February’s levels.
Milk inflation remained high at 8.5%, while onion prices fell year-on-year for the 19th month in a row since September 2021, with prices falling 36.8% during March. After four months of deflation, LPG prices rose 3.3% in March. Textiles products recorded a fourth successive month of falling prices, with the deflation rate quickening from 3.5% in February to 4.9% in March.
“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 Commerce and Industry Ministry said in a statement.
Electricity inflation jumped from 19.7% in February to 22.7% in March and the continuous increase on this front needs to be watched carefully, noted Sonal Badhan, an economist at Bank of Baroda.
“Within fuel, the dip was mainly owing to drop in international crude prices. However, if they begin to strengthen again on account of better than anticipated demand outlook from China, then it could add pressure. Going ahead, trajectory of food prices in the wake of ongoing heat wave conditions in the country will also be critical to monitor,” she said.
The retail inflation rate, measured by the Consumer Price Index (CPI), had eased to a 15-month low of 5.66% in March, thanks largely to base effects as the same month last year had recorded a nearly 7% pace of price rise.
The gap between the wholesale and retail inflation rates in the country expanded from 259 basis points (bps) in February to 432 bps, a level last seen around October 2020. One basis point equals 0.01%.
The inflation rate for January 2023 was revised slightly upwards from 4.73% estimated earlier to 4.8%, the statement indicated. On a month-on-month basis, the WPI was unchanged from February levels, with a sequential uptick in primary articles (1.2%) and food inflation (0.47%) offset by a 1.3% dip in fuel and power and a 0.3% decline in manufactured products prices.
Noting that March’s inflation pace was driven mainly by a high base, Rahul Bajoria, managing director and head of EM Asia (ex-China) Economics at Barclays, said he expected the WPI rate to fall further as global commodity prices come off their 2022 highs, domestic food inflation moderates, and favourable base effects play out more strongly.
