Wholesale inflation hits three month high in March, surges to 0.53%

India's wholesale price index-based inflation increased to 0.53% in March, the highest in three months, according to data from the Commerce Ministry on Monday.

The rise was mainly driven by food and primary articles. Wholesale onion prices surged by 56.99% in March, after a 29.22% increase in February. Experts predict a shortage in onion supply until the next kharif crop, reversing the current scenario of surplus and stable prices due to an export ban.

Similarly, potato prices rose by 52.96% in March, compared to a 15.34% increase in February. In the same month last year, onion prices had dropped by 36.83%, and potato prices by 25.59%, as per data.

The month-over-month change in the Wholesale Price Index (WPI) for March 2024 was 0.40%, up from February 2024. Food inflation climbed to 4.7% annually, compared to 4.1% in February. On a monthly basis, food inflation increased by 1.01%, up from 0.11% in February.

The positive inflation rate in March 2024 was primarily due to higher prices of food products, electricity, crude petroleum & natural gas, machinery & equipment, and other manufacturing products.

In March, inflation in crude petroleum and natural gas increased to 4.87%, 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.

The Reserve Bank of India (RBI), in its April MPC meeting, maintained its inflation forecast for the fiscal year at 4.5%. RBI Governor Shaktikanta Das expressed optimism, stating that inflation seems to be returning to the desired threshold of 4%, supported by favourable 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 optimistic about inflation returning to target levels.