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Business News/ Economy / Wholesale inflation rises to a three-month high in March
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Wholesale inflation rises to a three-month high in March

WPI-based inflation rose to a three-month high of 0.53% in March due to an increase in prices of food articles, electricity, crude petroleum, natural gas, machinery and equipment.

The wholesale inflation figure for March outpaced economists' expectation of a 0.51% rise, according to a Reuters poll.Premium
The wholesale inflation figure for March outpaced economists' expectation of a 0.51% rise, according to a Reuters poll.

NEW DELHI:India's wholesale price inflation rose to a three-month high of 0.53% in March due to an increase in the prices of food, electricity, crude petroleum, natural gas, machinery and equipment, according to data released by the Ministry of Commerce and Industry on Monday.

The WPI, a proxy for producers' prices, had risen to 0.86% in December, accelerating from 0.39% in November, before falling to 0.33% and 0.20% in January and February, respectively.

The inflation stood at 1.41% a year ago.

The March figure outpaced economists' expectation of a 0.51% rise, according to a Reuters poll.

Wholesale inflation remained in the negative territory between April and October last year due to a fall in prices of commodities like chemicals and chemical products, electricity, textiles, basic metals, food products, paper and paper products.

Wholesale inflation entered positive territory for the first time in seven months in November and has continued in positive territory since then.

"While both fuel and power and manufactured product categories continued in deflation, an uptick in food price inflation led to a higher overall print," said Rajani Sinha, chief economist at CARE Ratings, adding that she expects wholesale inflation to average around 3% in FY25.

"With the fading of a supportive base, it is anticipated that the WPI inflation will edge up in the upcoming months. The recent increase in global commodity prices, particularly driven by higher Brent crude prices and a rise in industrial metal prices, is expected to add to upward pressures on WPI," Sinha added.

However, expectations of a normal monsoon with waning El Nino conditions and a recovery in rabi sowing paint a positive outlook for agricultural production.

Food inflation fell to 6.88% in March, from 6.95% in February due to the easing of prices of pulses, vegetables and milk. However, the prices of other food products like paddy, cereals, onion, potatoes, fruits and meat rose during the month.

Prices of non-food articles declined 4.13%, fuel and power prices fell 0.77%, while crude petroleum and natural gas prices accelerated by 4.87% during March.

Prices of manufactured products declined 0.85% during the month.

Going ahead, continued rise in global crude oil prices, heat wave conditions impacting electricity demand and vegetable inflation remain key causes of concern, Bank of Baroda's economics research department said in a note.

"In Apr’24 so far, Brent is up by another 5.2% on a YoY basis, due to escalated geo-political tensions in the Middle East. If this trend continues, it may exert some further pressure on fuel inflation in the coming months," it added.

India's consumer price, or retail, inflation fell to a 10-month low of 4.85% in March, slipping below the 5%-mark for the first time since November 2023, aided by a slower rise in prices of food items like eggs, milk and milk products, fruits, pulses and spices.

Consumer price inflation remains above the central bank’s target of 4% but has stayed within its tolerance range of 2-6% for the seventh consecutive month.

Earlier in April, the Reserve Bank India (RBI) left the policy rate/repo rate unchanged at 6.5%, signalling that interest rate cuts may take some more time.

 

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ABOUT THE AUTHOR
Rhik Kundu
Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
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Published: 15 Apr 2024, 04:29 PM IST
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