Wholesale inflation cools to a four month-low in March

India’s wholesale inflation eased to a four-month low in March, as food prices showed a slower pace of increase, according to provisional data from the Ministry of Commerce & Industry.

Wholesale inflation, a key gauge of producer prices, rose 2.05% year-on-year in March, down from 2.38% in February, and lower than the 2.5% forecast by economists in a Reuters poll.

Food prices cool 

Food prices, which make up 24.38% of the index, increased by 4.66% in March, a notable slowdown from the 5.94% rise in February.

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Cereal prices rose 5.49% year-on-year in March, easing from the 6.77% increase recorded in February. Meanwhile, vegetable prices contracted by 15.88%, a deeper drop than the 5.80% decline the previous month. Fruit prices rose 20.78%, nearly unchanged from February’s 20.88% increase.

"The dip was largely led by food items, with the WPI-food inflation cooling to a seven-month low of 4.7% from 5.9% in the previous month, amid a deeper deflation in vegetables and pulses," said Aditi Nayar, chief economist and Head - Research & Outreach, Icra Ltd.

Nayar expects WPI food inflation to ease to 3–3.5% in April, supported by softer commodity prices and a favorable base. However, she cautioned that higher-than-usual temperatures could push food inflation upward in the second half of the month.

Last week, the Reserve Bank of India (RBI) lowered the repo rate by 25 basis points (bps), taking the total cut in this easing cycle to 50bps. 

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The central bank's monetary policy committee (MPC) said that there has been a decisive improvement in the inflation outlook, but also warned that lingering global market uncertainties and the recurrence of adverse weather-related supply disruptions pose upside risks to the inflation trajectory.

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March retail inflation data is due later today.

Manufacturing prices rise 

Manufactured product prices, which account for about 64% of the wholesale price index, increased by 3.07% in March, up from a 2.86% rise in February.

Fuel and power prices edged up by 0.20% in March, reversing the 0.71% contraction seen in February.

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The prices of primary articles—covering food, non-food articles, minerals, crude oil, and natural gas—rose by 0.76% in March, a slowdown from the 2.81% rise in February. Non-food articles saw a 1.75% rise, compared to a 4.84% increase the previous month.