India's wholesale price index-based inflation climbed to 0.53% in March, marking its highest level in three months, according to data released by the Commerce Ministry on Monday.
The uptick was largely driven by increases in food and primary article prices. In March, wholesale onion prices surged by 56.99%, following a 29.22% increase in February. Analysts foresee a shortage in onion supply until the next kharif crop, reversing the previous surplus and stable pricing trend resulting from an export ban.
Similarly, potato prices rose by 52.96% in March, compared to a 15.34% increase in February. This contrasts with the same period last year when onion prices had dropped by 36.83%, and potato prices by 25.59%, according to data.
The month-over-month change in the Wholesale Price Index (WPI) for March 2024 stood at 0.40%, up from February 2024. Annual food inflation climbed to 4.7%, compared to 4.1% in February. Every month, food inflation surged by 1.01%, a significant increase from 0.11% in February.
The positive inflation rate in March 2024 was primarily attributed to higher prices of food products, electricity, crude petroleum & natural gas, machinery & equipment, and other manufacturing products.
Inflation in crude petroleum and natural gas surged to 4.87% in March, contrasting with a contraction of -1.19% in the same month last year. For primary articles, inflation rose to 4.51% from 4.49% in the previous month.
Core inflation stood at -1.2% in March, compared to -1.3% in February. Prices of manufactured products fell by 0.85%, while fuel and power prices dropped by 0.77%.
India's retail inflation eased to 4.85% annually in March, down from 5.09% in the previous month.
During its April MPC meeting, the Reserve Bank of India (RBI) maintained its inflation forecast for the fiscal year at 4.5%. RBI Governor Shaktikanta Das expressed optimism, stating that inflation appears to be returning to the desired threshold of 4%, supported by favorable base effects. However, he acknowledged persistent pressures from service prices.
Despite concerns about a scorching summer, rising crude oil prices, and supply chain disruptions due to the Red Sea crisis, the central bank remains hopeful about inflation returning to target levels.
