The Wholesale Price Index (WPI) inflation fell sharply to 5.96% in March, a three-year low that came at the back of easing of prices of vegetables and increased the pitch for an interest rate cut by the Reserve Bank of India. The central bank is set to meet on May 3 to announce its annual monetary policy.
The decline in WPI inflation was the lowest since December 2009 when it was 4.95%. Inflation stood at 6.84% in February and 7.69% in the corresponding period a year ago. Even food inflation dropped from 11.38% in February to 8.73% in March. Inflation in vegetable prices was (-)0.95% in March as compared to 12.11% in February.
Inflation in the manufactured items saw a nominal fall of 4.07% from 4.51% in February. Prices of onions were 94.85% in March as compared to 154.33% in February.
Inflation in rice prices softened to 17.90% compared to 18.84% a month ago.
“Inflation behaviour is consistent with what government has been saying that it is slowly coming under control,” Montek Singh Ahluwalia, Deputy Chairman, Planning Commission said.
However, double-digit food inflation still remained a cause for concern. The drop in inflation coupled with a slowdown in factory output to 0.6% in February has strengthened the pitch for a slashing of interest rates.
India Inc batted for a reduction in rates in order to boost growth and encourage investor sentiment.
“Going ahead we expect this trend to continue and this should give more space to RBI for considering a cut in the policy rates. A cut in interest rates is critical as industrial growth continues to remain sluggish,” Naina Lal Kidwai, President, FICCI said.
“While inflation control is one of the main responsibilities of the central bank, ensuring that growth does not fall to a dismal level is also its key task,” Rajkumar Dhoot, President, Assocham and CMD of Videocon Group, observed.
The drop in inflation by nearly one per cent has come as positive news to the industry.