India’s wholesale inflation has reached its lowest level in four months as of March, driven by a notable slowdown in food price increases, according to preliminary figures from the Ministry of Commerce and Industry. The wholesale price index (WPI), which serves as a crucial indicator of producer prices, recorded a 2.05% year-on-year rise in March, a decrease from 2.38% in February and below the 2.5% anticipated by economists in a Reuters survey.

Food Prices Experience Significant Easing

Food prices, which constitute 24.38% of the WPI, climbed by 4.66% in March, a marked reduction from the 5.94% increase seen in the previous month. This cooling trend has important implications for the broader inflation landscape.

• Cereal prices rose by 5.49% year-on-year in March, down from 6.77% in February.
• Vegetable prices faced a substantial decline of 15.88%, a more pronounced drop compared to the 5.80% decrease recorded the prior month.
• Conversely, fruit prices experienced a slight adjustment, rising by 20.78%, nearly consistent with February’s 20.88% increase.

Aditi Nayar, chief economist and Head of Research & Outreach at Icra Ltd, noted that the primary driver behind this decline was food products, with WPI food inflation cooling to a seven-month low of 4.7%, down from 5.9% in February. She anticipates that food inflation may further ease to between 3% and 3.5% in April, supported by more favorable commodity prices and a beneficial base effect. However, she warns that elevated temperatures could reverse these trends later in the month.

Monetary Policy Adjustments by RBI

In a related development, the Reserve Bank of India (RBI) recently cut the repo rate by 25 basis points, bringing the total reduction in this easing cycle to 50 basis points. The RBI’s monetary policy committee (MPC) acknowledged improvements in the inflation outlook but also highlighted ongoing global uncertainties and potential weather-related disruptions that could pose upward risks to inflation rates.

• The committee’s stance reflects a commitment to maintaining an accommodative monetary policy.
• Upcoming retail inflation data for March is set to be released later today, which could further impact economic assessments.

Manufactured Goods and Energy Prices

Manufactured goods prices, making up nearly 64% of the wholesale price index, saw an increase of 3.07% in March, up from 2.86% in February. Additionally, the prices for fuel and power edged up by 0.20% in March, reversing a previous contraction of 0.71%.

• The prices of primary articles, which include various food and non-food items, increased by 0.76% in March, a slowdown from 2.81% in February.
• Non-food articles reported a 1.75% rise, down from 4.84% in the prior month.

Understanding these trends in wholesale inflation is vital for anticipating shifts in consumer prices and managing economic strategies moving forward.