The Wholesale Price Index (WPI)-based inflation fell to 2.47 per cent in March due to a dip in prices of food items, especially vegetables and pulses. The latest WPI inflation print is the lowest since July 2017. In February 2018, inflation was at 2.48 per cent.
It may be recalled that WPI inflation was at 5.11 per cent in March last year.
Food articles inflation contracted in March 2018 at 0.29 per cent against 0.88 per cent in the previous month.
Manufactured products inflation was at 3.03 per cent, lower than 3.22 per cent in the same month last year. Meanwhile, the WPI inflation for January 2018 has been revised upwards to 3.02 per cent from a level of 2.84 percent (provisional) earlier.
Experts’ views
Sunil Sinha, Principal Economist, India Ratings & Research,said inflation in the food article category — which has been declining since November 2017— turned into deflation in March 2018. This was mainly driven by the sharp correction in prices of vegetables, he said.
Core inflation dropped to 3.5 per cent in March 2018 from 3.9 per cent in February 2018. The movement in core inflation at the retail and wholesale level were in the opposite direction in March 2018.
It may be too early to draw any inference from such movement, the divergence suggests that impulse of demand recovery at the moment is being felt at the retail level and not so much at the wholesale level, he said.
However, if the firmness in the core inflation at the retail level continues, it will soon begin to reflect at the wholesale level as well, Sinha said.
Aditi Nayar, Principal Economist, ICRA , said a downturn in food and mineral prices helped to offset the unfavourable base effect and keep the wholesale inflation steady at 2.47 per cent in March 2018.
Primary food articles recorded a year-on-year (YOY) disinflation after a gap of eight months in March 2018, dampened by a YoY contraction in all of the major categories (namely vegetables, cereals, pulses, eggs, meat and fish, other food articles, and condiments and spices) except for fruits and milk, she said.
Nayar said the rise in global crude petroleum and natural gas prices, as well as the recent depreciation of the rupee against the dollar, is likely to push the WPI inflation up in April.
Crude oil prices
However, the extent of pass through of higher crude oil prices to retail fuel prices, in light of whether the uptick is absorbed by the oil marketing companies or cuts in excise/VAT are instituted by the Central or State Governments, remains to be seen, she added.
“At present, we expect the average WPI inflation to rise to around 3.9 per cent in 2018-19 from 2.9 per cent in 2017-18,” Nayar said.