According to recent reports, the wholesale price-based inflation in India eased to a 29-month low of 1.34% in March. This has been attributed to a decline in prices of manufactured products and fuel items, despite food articles becoming costlier during this period. This marks the 10th straight month when the wholesale price index (WPI) based inflation has declined. In February, inflation stood at 3.85%, while it was 14.63% in March 2022.
However, inflation in food articles rose to 5.48% in March, as opposed to 3.81% in February. The commerce and industry ministry reported that the decline in the rate of inflation was primarily due to a fall in prices of basic metals, food products, textiles, non-food articles, minerals, rubber & plastic products, crude petroleum & natural gas, and paper and paper products.
Wheat and pulses experienced inflation rates of 9.16% and 3.03%, respectively, while inflation in vegetables was -2.22% in March 2023. Additionally, inflation in oilseeds was -15.05% in March 2023. Fuel and power basket inflation eased to 8.96% last month from 14.82% in February. In manufactured products, inflation was -0.77% compared to 1.94% in February.
The deceleration in WPI is in line with the easing of March retail inflation. The consumer price index-based retail inflation declined to a 15-month low of 5.66% in March from 6.44% in February.
However, the Reserve Bank of India (RBI) has cautioned that adverse climatic conditions pose a risk to the future inflation trajectory. The RBI has also predicted that milk prices will remain firm in the summer due to the tight demand-supply situation and fodder cost pressure. Earlier this month, the central bank paused the interest rate hike and held the benchmark rate at 6.50%. The RBI projected retail inflation to average 5.2% in the current fiscal year.
In conclusion, while the WPI has reached a 29-month low of 1.34%, there are still concerns regarding food inflation and the impact of adverse climatic conditions on future inflation. It remains to be seen how these factors will influence the inflation trajectory in the coming months.
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