Wholesale Price Index, Consumer Price Index Slump to Record Low, RBI Expects Inflation to Moderate This Year

In March of this year, the annual rate of inflation based on the all-India Wholesale Price Index (WPI) was 1.34%. A substantial decrease from 3.85% in February 2023. 

A press release from the Ministry of Commerce and Industry stated, “Decline in the rate of inflation in March 2023 is primarily contributed by fall in prices of basic metals, food products, textiles, non-food articles, minerals, rubber & plastic products, crude petroleum & natural gas and paper and paper products”.

In India, WPI inflation monitors the price of a basket of wholesale products. It is organised into three categories: manufactured goods, primary articles, and fuel and power, with respective weight percentages of 64.2%, 22.6%, and 13.2%.

Rate of Inflation in the Last Three Months

The report by the Ministry of Commerce indicated that the WPI inflation in January was recorded at 4.80%, then in February, it declined by 0.95% to 3.85%, while in March, WPI inflation saw a significant decrease 2.51% to hit 1.34%.

While the rate of inflation saw a significant decline from February to March, the WPI index remained unchanged at 150.9.

Meanwhile, retail inflation in the country, as measured by the consumer price index (CPI), fell to a 16-month low of 5.66% last month. The rate of inflation was at its highest point a year ago in April, reaching 7.79%, while WPI reached 15.88% in May 2022. According to the Reserve Bank of India, inflation is expected to be 5.2% in FY24. The RBI expects CPI inflation to moderate this fiscal year.

The RBI Governor stated that the MPC agreed to stay focused on gradually withdrawing accommodation to ensure inflation aligns with the objective while sustaining growth.

Positive Signs for Indian Economy

Economists suggest the decline in inflation is a positive sign for the Indian economy, as it indicates that prices of goods and services are under control. A decline in inflation can lead to an increase in consumer spending and business investments, which can stimulate economic growth.

The Indian government has been taking measures to control inflation, including increasing the production of essential goods, implementing price controls, and reducing taxes. The Reserve Bank of India has also been taking steps to control inflation, including raising interest rates and tightening monetary policy.

While inflation remains a concern for policymakers, the decline in prices of basic metals, food products, textiles, non-food articles, minerals, rubber and plastic products, crude petroleum and natural gas, and paper and paper products is likely to lead to increased consumer spending and business investments, which can stimulate economic growth.