Wholesale price inflation remained negative for the 17th month in a row in March at -0.85%, though the extent of deflation reduced a bit with some pick-up in prices of both food and manufactured items.
The WPI inflation had stood at -0.91% in February, and it was -2.33% in March 2015.
Core WPI deflation eased sharply to -1.1% in March from -1.6% in February, indicating higher commodity prices (input costs) and a nascent improvement in domestic demand (output prices), research firm Nomura said.
“We expect average WPI deflation to ease to -1.4% y-o-y in 2016 from -2.7% in 2015 on waning base effects from the fall in commodity prices and a continued gradual rise in output prices amid a domestic demand recovery,” Nomura said.
Last week, the government reported that retail inflation moderated to 4.83% in March, its lowest since September 2015.
With the weather office forecasting an above-normal monsoon, which could keep food inflation under check, expectations have risen of further interest rate cut by the central bank.
On April 5, the RBI announced a 25-basis point cut in its key lending rate, taking the cumulative policy rate cut to 150 basis point since January 2015, as retail inflation has remained under its comfort level. It has projected CPI inflation to be around 5% by FY17-end.
Wholesale food inflation (primary and manufactured) rose to 4% in March from 3.7% in February, mainly due to a sequential pick-up in prices of milk, egg, meat & fish, even though vegetable and pulse prices continued to fall sequentially.
Even though annual inflation print in the fuel and power as well in the manufacturing group stood in the negative territory at -8.30% and -0.13% in March, respectively, these indices moved up month-on-month.