According to data published on April 17 by the Ministry of Commerce and Industry, India’s wholesale inflation slowed further in March to 1.34 percent. The most recent Wholesale Price Index (WPI) inflation rate is the lowest it has been in 29 months.
Inflation, as measured by the WPI, was 3.85% in February and 14.63% in March 2022.
The decrease in March WPI inflation follows the Ministry of Statistics and Programme Implementation’s announcement on April 12 that headline retail inflation fell to a 15-month low of 5.66 percent in February.
Similar to retail inflation, wholesale inflation decreased significantly in March due to a favourable base effect. The all-commodity index of the WPI remained unchanged from February to March, indicating that the overall price momentum was minimal.
However, the zero month-over-month change in the WPI’s all-commodity index occurred despite sequential declines in two of the main categories.
In March, the ‘fuel and power’ index was 1.3% lower than in February, while the index for manufactured goods was 0.3% lower. However, these two declines were offset by a 1.2% month-over-month increase in the index of primary articles.
Minerals (up 8.2 percent), crude petroleum (up 6.8 percent), vegetables (up 5.5 percent), and fruits (up 5.5 percent) had the greatest sequential price increases among primary commodities (up 3.8 percent).
Although the Reserve Bank of India’s (RBI) policy target is not specified in terms of WPI inflation, it is a critical factor in monetary policymaking because it affects retail prices.
The RBI’s Monetary Policy Committee astonished markets on April 6 by maintaining the repo rate at 6.5 percent despite expectations of a 25-basis-point increase.
One basis point is equivalent to one hundredth of a percentage point.
While the MPC has stated that it will take policy action at upcoming meetings if necessary, most economists believe the rate-setting panel’s cycle of rate hikes has ended.