Wholesale Inflation Cools From Three-Year High
Wholesale inflation rises 5.7 percent, lower than the estimated 6 percent.
Wholesale inflation in March cooled from a three-year high in February, led by a decline in prices of food products and non-food articles.
The Wholesale Price Index rose 5.7 percent during the month, compared to a year ago, according to the data release by the Ministry of Commerce and Industry. A Bloomberg survey of economists had pegged wholesale inflation at 6 percent. On a month-on-month basis, the index declined 0.1 percent.
The decline in headline inflation was driven in part by lower prices of non-food articles including items like flowers and rubber. This sub-index fell 1.8 percent on a month on month basis. Prices of food products also declined by 1.2 percent in March.
Apart from these two components, prices across most key categories were stable. The manufactured goods index declined 0.1 percent month on month, as did the fuel and power index. The food prices index was mostly unchanged.
On a year on year basis, the inflation rate across major categories is as below:
- Food prices rose 3.12 percent.
- Prices of primary articles rose 4.63 percent.
- Prices of manufactured goods rose 2.99 percent.
- Prices in the fuel and power segment rose 18.16 percent.
The sequential decline in headline WPI inflation in March 2017 was slightly sharper than expected and fairly broad-based, with all the major categories other than primary food inflation displaying a downtrend. A waning of the unfavourable base for minerals as well as the 1.8 percent appreciation of the Rupee relative to the US Dollar, cooled WPI inflation in March 2017.Aditi Nayar, Principal Economist, ICRA Ltd.
A surge in wholesale inflation in February had raised concerns about underlying inflation pressures in the economy which could eventually feed into retail inflation as well. The Consumer Price Index (CPI) surged to a five-month high of 3.8 percent in March. The rise, however, was lower than the expected figure of 3.94 percent because of easing food prices.
The Reserve Bank of India (RBI) expects retail inflation to average 4.5 percent in the first half of financial year 2017-18 and 5 percent in the second half. Concerned about a likely pick-up in inflation pressures, the RBI changed its monetary policy stance from accommodative to neutral in February. The central bank has a medium term target of bringing inflation down to 4 percent.
The Monetary Policy Committee remains committed to bringing headline inflation closer to 4.0 per cent on a durable basis and in a calibrated manner. Accordingly, inflation developments have to be closely and continuously monitored, with food price pressures kept in check so that inflation expectations can be re-anchored.RBI’s Post Policy Statement (April 6)