The largest contraction in prices have been observed in the category of fuel and power, which became cheaper by 10 per cent in the month.
Low crude prices and the nationwide lockdown led petrol and diesel to get cheaper by nearly 15 per cent in the month of April 2020. The largest contraction in prices have been observed in the category of fuel and power, which became cheaper by 10 per cent in the month, said a statement by the Ministry of Commerce & Trade. Prices of fuel and power shrank by 1.76 per cent in the previous month. Price movements of many other categories could not be established due to the lockdown and limited transactions of products in the wholesale market.
The rate of inflation based on WPI Food Index decreased from 5.49 per cent in March to 3.60 per cent in April 2020. These numbers are provisional and will be revised by the government, said Sriram Iyer, Senior Research Analyst at Reliance Securities. However, the fall in wholesale prices of food has brought optimism in the market and indicates that the hike in retail prices is temporary.
Food inflation displayed a divergent trend at the wholesale and retail levels in the month of April 2020. The decline in the WPI food inflation is encouraging and suggests that the spike in retail food inflation was largely driven by disruption related to the lockdown, said Aditi Nayar, Principal Economist, ICRA. Vegetables were a major driver of the downtrend in the wholesale food inflation in April 2020, suggesting that their perishable nature amidst uncertain demand during the lockdown, contained the normal seasonal uptick seen with the rise in temperatures, she added.
Meanwhile, the wholesale prices of potato and onion remained sky-high. WPI inflation for potatoes stood at 59 per cent on-year while that of onions stood at 73 per cent on-year. Even as RBI Governor Shaktikanta Das had said that RBI cannot establish the outlook of inflation until things get back to normal, it was speculated that the food prices may rise due to some food products being perishable, lack of cold storage facilities, lockdown and transport restrictions.