India grappled with an unanticipated escalation in wholesale price inflation during March, which rose to the highest level witnessed in the past three months. The inflation hit a peak of 0.53% up from the previous month’s 0.2%. This unexpected surge was primarily driven by a significant rise in food prices, particularly cereals, which experienced the steepest climb in 12 months. Concerning individual foodstuffs, the inflation rates for paddy hit a lofty 11.7%, potatoes skyrocketed by 53%, and onions by an even steeper 57%.
This trend was mirrored in the Wholesale Price Index (WPI), which reflected notable inflation in both pulses and vegetables at the wholesale level, recorded at 17.2% and 19.5%, respectively. Despite these hikes, some sectors, such as fuel and power alongside manufactured products, managed to maintain a deflationary stance. However, it’s noteworthy that the degree of deflation has lessened since last year, moderating to about 0.8% in March.
Delving into the monthly performance, the WPI rose by 0.4% — marking the initial monthly increase after a stagnant four months. The food index advanced by 1.01%, and the primary articles category saw a rise of 0.9%. Even in the face of inflationary pressures in food and primary articles, manufactured products and the fuel and power categories experienced milder upticks of 0.21% and 0.06%, respectively.
The Commerce and Industry Ministry of India did not overlook past data, taking the time to adjust the WPI for January 2024. This revision saw the inflation rate for that month being elevated from the earlier estimate of 0.27% to 0.33%.
Amidst this volatile inflation environment, some commodities did bring a breath of relief. Wholesale prices of eggs, meat, and fish witnessed a cumulative decline of 1.86%. This fall in wholesale prices presents a stark contrast to the consumer market, where retail prices for eggs soared beyond 10% and meat and fish by over 6% last month. Another modest respite was offered by the milk sector, which saw inflation decelerate to 4.7% in March, down from February’s 5.5%. Nonetheless, wheat prices nearly tripled from a 2.34% rise in February, marking a sharp 7.43% increase last month.
The ministry attributed the inflationary trend in March 2024 mainly to the rising prices of food articles, electricity, crude petroleum & natural gas, machinery & equipment, along with other manufacturing sectors.
When reflecting on the full fiscal year 2023-24, it’s evident that wholesale prices on average hovered in a deflationary domain, averaging a negative 0.7%. This has been earmarked as the lowest pace of price rise since the fiscal year 2015-16. Senior director and principal economist Sunil Kumar Sinha, along with senior analyst Paras Jasrai from India Ratings and Research, observed that while the wholesale inflation in the fourth quarter averaged a one-year peak of 0.4%, it was sufficiently modest to ease corporate burdens by maintaining moderate input prices.
The future, however, might present new challenges. Amidst geopolitical tensions, such as the flare-up between Iran and Israel, and crude oil prices breaching the $90-per-barrel mark, the firm anticipates a prospective average increase of 2.4% in wholesale prices for the first quarter of 2024-25.
Bank of Baroda economist Sonal Badhan asserts that international commodity prices are experiencing increased strain. She points towards the potential exacerbation of international crude oil prices, the domino effects of heat wave conditions on electricity demands, and the sustained inflation in vegetables as key concerns looming over the horizon that could further aggravate inflation woes.
