India sees marginal rise in wholesale inflation in March

Wholesale inflation in India, measured by the Wholesale Price Index, ticked upward in March, marking its fifth consecutive month in positive territory. This comes after seven months of residing in the negative zone until October.

Official data released on Monday revealed that the annual rate of inflation based on all India Wholesale Price Index (WPI) numbers rose to 0.53% (Provisional) for March 2024 (over March 2023).

The uptick in inflation for March 2024 is mainly attributed to the rise in prices of food articles, electricity, crude petroleum and natural gas, machinery and equipment, and other manufacturing items.

Economists view this modest increase in wholesale inflation positively, as it typically encourages manufacturers to increase production.

Last year in April, wholesale inflation had dipped into negative territory. Similarly, during the initial stages of the COVID-19 pandemic in July 2020, the WPI had recorded negative figures.

From a high of 8.39 per cent in October 2022, wholesale inflation has seen a decline. It is to be noted that wholesale price index (WPI)-based inflation had persistently remained in double digits for 18 consecutive months until September 2022.

The government releases wholesale price index numbers on a monthly basis, typically on the 14th of each month (or the next working day). These index numbers are compiled using data from institutional sources and selected manufacturing units across the country.

Meanwhile, retail inflation in India saw a slight decrease in March, dropping to 4.85 per cent from 5.10 per cent the previous month.

Although retail inflation in India falls within the Reserve Bank of India’s (RBI) comfort range of 2-6 per cent, it remains above the ideal scenario of 4 per cent.

The RBI has hiked the repo rate by a cumulative 250 basis points to 6.5% since May 2022 in its efforts to combat inflation. Increasing interest rates is a monetary policy tool typically used to dampen demand in the economy, thereby helping to lower the inflation rate.