India’s wholesale inflation falls to 1.34%, deflation in products

CHENNAI: India's wholesale price index (WPI)-based inflation fell to a 29-month low of 1.34 per cent in March owing to a steep fall in indexes of primary articles, manufactured products, fuel and power as well as food.

Wholesale inflation was 3.85 per cent in February 2023, while it was 4.73 per cent in January 2023.

Even the February WPI inflation at 3.85 per cent was a two-year low.

In January 2021, wholesale inflation had fallen to 2.51 per cent.

The wholesale inflation figures have come just days after retail inflation had stood at 5.66 per cent for March 2023, which too was at a 15-month low.

"The fall in WPI inflation to a 29-month low of 1.3 per cent in March has been supported by the high base of the previous year. It is important to note that the manufactured products category has witnessed a deflation for the first time in about three years supported by lower textile and metals prices," Rajani Sinha, Chief Economist, CARE Ratings, told IANS.

However, there has been an uptick in food prices, somewhat offsetting the lower prices for fuel and power and manufactured products, she said.

According to Sinha, the downtrend is expected to continue, with the WPI inflation remaining below 1 per cent for the next three months, given the favourable base.

"Some uptick can be seen Q2 onwards as the support from favourable base fades but the monthly WPI inflation is still expected to remain below 5 per cent in absence of any major turnaround in global crude oil and commodity prices. For FY24, we expect WPI inflation to average around 2.6 per cent, lower than the estimated average retail inflation at 5.1 per cent," Sinha concluded.

Reacting to the WPI numbers, Dheer Shah, CFO, BDR Pharma said, after CPI inflation data released last week fell to a 15-month low, WPI inflation has slowed to a 29-month low.

"Most components of the WPI inflation rate have eased across manufactured, primary, and fuel and power groups. The fall in wholesale inflation is a positive development. On expected lines, the data has been softening for the past few months and falling in sync with retail inflation. As we advance, a good monsoon year will help with stable WPI inflation, whereas a spike in crude prices will pose a risk to wholesale and retail inflation," Shah said.

Inflation must be stable and in a range for the central bank to put its interest rate policy on hold and start easing from CY24 onwards, Shah added.