WPI enters deflation in April first time in 3 yrs as mfg item prices dip
Continuing its downward trajectory for the tenth consecutive month, the wholesale price index- (WPI) entered deflation for the first time in nearly three years. It fell to a 34-month low of -0.92 per cent in April from 1.34 per cent in March due to a higher base effect and the continuing contraction in the prices of manufactured products.
The factory-gate inflation was 15.38 per cent in April 2022. Earlier, it was -1.81 per cent in June 2020.
Data released by the commerce and industry ministry on Monday showed that prices for manufactured items (-2.42 per cent) contracted further in April from -0.77 per cent in March, led by a decelerated price rise in items like beverages, tobacco, apparel, leather, pharmaceuticals and cement and a dip in the prices of chemicals (-3.29 per cent) and fabricated metal products (-0.07 per cent).
Contraction in prices continued in textiles (-5.76 per cent), manufactured food products (-5.65 per cent), fats (-25.91 per cent), wood (-1.99 per cent), paper (-4.62 per cent), basic metals (-9.8 per cent) and rubber products (-2.51 per cent).
Food inflation, excluding manufactured food items, declined to 3.54 per cent from 5.48 per cent in March. This was led by deceleration in price rise of cereals (7.69 per cent), paddy (7.12 per cent), wheat(7.27 per cent), eggs & meat(0.77 per cent) and milk (7.10 per cent). Although, pulses saw a slight price rise (5.55 per cent).
On the other hand, prices of vegetables (-1.50 per cent), onion (-18.41 per cent), potato (-18.66 per cent) and fruits (-4.55 per cent) shrank.
Besides, fuel inflation eased sharply to 0.93 per cent in April from 8.96 per cent in March, led by deceleration in price rise of petrol (1.53 per cent) and high-speed diesel (1.42 per cent). Moreover, LPG prices contracted to 10.49 per cent in April.
The fall in WPI comes after the consumer price index (CPI) based retail inflation continued its downward trajectory to 4.7 per cent in April from 5.66 per cent in March and remained below the central bank’s tolerance limit for the second consecutive month .
Last month, the six-member Monetary Policy Committee (MPC) unanimously decided to keep the policy repo rate unchanged at 6.5 per cent but had declined to concede that the rate cycle had peaked.
Although the RBI tracks retail inflation for its monetary policy decisions, with both the CPI and WPI inflation remaining low, there are chances that the RBI may opt for an extended pause, even as the divergence between retail and wholesale price inflation has now increased to 562 basis points (bps) in April from a meagre 24 bps in November last year.
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