Wholesale inflation eases to six-month low

India’s wholesale price inflation eased to a six-month low of 2.1% in March, from 2.4% in February largely due to lower food prices, showed official data released Tuesday. The Wholesale Price Index (WPI), which measures changes in producer prices, however rose from 0.3% in March 2024.

Paras Jasrai, associate director at India Ratings and Research (Ind-Ra) attributed the sequential drop in inflation to benign food prices and decline in energy and mineral prices.

Overall, wholesale price inflation rose to 2.3% in FY25 from -0.7% in FY24, according to WPI data.

“Lower crude oil prices have had a direct bearing on the index and will continue to put downward pressure,” said Madan Sabnavis, chief economist at Bank of Baroda.

He also highlighted that food inflation has been lower with base effect playing an important role, besides moderation in vegetable and pulses prices.

WPI food inflation dropped to a seven-month low of 4.7% in March from 5.9% in February. On an annual basis, it rose to 7.8% in FY25 from 6.6% in FY24.

Among key food items, vegetable and pulses inflation contracted by 15.9% and 3% year-on-year respectively in March. On the other hand, fruit inflation surged to 20.8% due to a low base effect.

Potato prices decelerated by 6.8%, while onion prices surged 26.7%.

Cereal inflation was at a 14-month low of 5.5% due to better kharif output.

“The easing of food inflation would help in bringing relief to households and the consumption demand as we begin the new fiscal year,” said Jasrai.

Inflation in manufactured products, which account for 64.23% of WPI, increased to 3.1% year-on-year in March from 2.9% in February.

Within manufactured goods, vegetable and animal oils and fats recorded the highest inflation of 31%, followed by food products manufacturing at 10.7%.

Inflation in primary articles declined to 0.76% in March from 2.81% in February. However, fuel and power inflation turned positive, rising to 0.2% from -0.71%.

Wholesale core inflation climbed to a more than two-year high of 1.6% in March due to rising gold prices.

Looking ahead, WPI inflation is expected to stay at these low levels, said Sabnavis.

“The positive spillover effect of low commodity prices would be felt through low wholesale inflation in the near term. Moreover, the satisfactory completion of rabi output would result in the food inflation to be comfortable,” said Jasrai.