WPI-based inflation: India's wholesale price inflation rose marginally to 0.53 per cent in March 2024 compared to the same month last year, according to data released by the government's Press Information Bureau (PIB) today. This is slightly higher than the 0.51 per cent increase predicted by economists polled by Reuters. The increase comes after a rise of 0.20 per cent in February 2024.

The rise in wholesale prices is primarily attributed to an increase in the prices of food articles, electricity, crude petroleum & natural gas, machinery & equipment, and other manufactured goods. The WPI Food Index, which includes food articles from the Primary Articles group and food products from the Manufactured Products group, also saw an increase, rising from 178.3 in February to 180.1 in March. The rate of inflation based on this index rose from 4.09 per cent to 4.65 per cent during the same period.

“In line with the expectations, WPI inflation rose to 0.5 per cent in March, continuing in the positive territory for the fifth consecutive month. 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, CareEdge.

“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.

Sinha also said it's worth noting that expectations of a normal monsoon with waning El Nino conditions and a recovery in rabi sowing paint a positive outlook for agricultural production and, consequently, food inflation. “This is anticipated to cushion the WPI prints to a certain extent. Nonetheless, geopolitical tensions in the Middle East remain significant variables to monitor closely. We expect WPI inflation to average around 3 per cent in FY25,” he concluded.

Despite the uptick, the inflation rate remains well below the Reserve Bank of India's target range of 2 per cent-6 per cent. This could ease concerns about the need for further monetary tightening by the central bank.

Businesses in India can take a sigh of relief as the latest wholesale price inflation data suggests a stable price environment. The marginal increase is unlikely to significantly impact production costs or consumer spending. This stability can contribute to a positive business outlook for the coming months.

Looking ahead

The next release of the WPI data is expected on May 14, 2024. It will be crucial to monitor the trend in wholesale price inflation in the coming months to assess its potential impact on the overall economy.