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Wholesale deflation persists for 17th month, at 0.85% in March

Continuing the deflationary trend for 17th month, WPI inflation was at (-)0.85 per cent in March but may inch up gradually in the coming months on growing pressure on food and vegetable prices. The Wholesale Price Index-based inflation rate in March was marginally higher at (-)0.91 per cent in February. In March last year, it was (-)2.33 per cent.

This is the 17th straight month since November 2014 when deflationary pressure persisted. Food inflation stood at 3.73 per cent in March compared with 3.35 per cent in February, showed official data released on Monday.

Inflation rate for vegetables came in at (-)2.26 per cent in March, while for cereals and pulses it was at 2.47 per cent and 34.45 per cent respectively.

India Ratings said that although prices of oil and manufactured items are expected to remain benign and keep the pressure on WPI inflation low, the same cannot be said about food inflation over the next few months despite the prediction of an above than normal monsoon. 

“Prices of cereals have shown some escalation in March and with summer season setting in there will be pressure on vegetable/fruit prices to rise. As a result, WPI inflation is expected to move into positive territory next month but will remain in low single digit in the foreseeable future,” said Sunil Kumar Sinha, Principal Economist, India Ratings.

The inflation print in the fuel and power segment was (-)8.30 per cent, and for manufactured products, it read (-)0.13 per cent in March. Onion and fruits saw easing of prices, with these sub-indices falling by 17.65 per cent and 2.13 per cent, respectively. Industry body Assocham said that although predictions of weather department are in favour of the ongoing Rabi season, policymakers should contain the upward price pressure if it surfaces in the coming months. 

“Since the government has shown its commitment to support industry and considering that recent RBI policy stance to kick-start investment and credit cycle can have positive impact on India’s economy in the coming months, WPI is likely to move upwards,” Assocham President Sunil Kanoria said. 

Pulses have shown upward price pressure continuously for the past six months and policymakers should check and address this issue through supply side responses, Assocham said.

The January WPI inflation has been revised lower to (-)1.07 per cent from the provisional estimate of (-)0.90 per cent. The Reserve Bank mainly looks at retail inflation data while firming up its monetary policy stance. Retail inflation in March fell to a six-month low of 4.83 per cent.

RBI earlier this month cut the key policy rate by 0.25 per cent and projected retail inflation to be around 5 per cent this fiscal. 

It had said there were uncertainties over unseasonal rains, the likely spatial and temporal distribution of the monsoon, the low reservoir levels by historical averages, and the strength of the recent upturn in commodity prices, especially oil.

The Meteorological Department, later, forecast an above- normal monsoon for this year.
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