Food prices are finally witnessing a sharp fall, which has dragged India’s retail inflation to 3.34%, a level last seen during August 2019. It is the food inflation and the headline inflation in March that dipped drastically owing to the dip in the prices of vegetables, pulses, eggs, meat, and fish, cereals, and milk products. The headline inflation has declined by 27 basis points in March against February’s level. However, the star of the show is food inflation, which dropped by 106 basis points to 2.69% during March from 3.75% in February.

Food Inflation 

While the CPI inflation declined to a five-year low of 3.34% in March, the 2.69% food inflation in March is the lowest since November 2021. Vegetable prices declined by around 7% while pulses declined by 2.7%. Having said that, the edible oil prices soared by 17% while fruit prices surged by 16% during March. 

Core inflation during the period was above 4% which is determined by deducting the food and fuel inflation from headline inflation.  The core inflation has remained mild over time around 4.1% only with few upticks. After 18 months, fuel and light prices came out of the deflation phase in March however, experts suggest that this trend may not sustain because distribution companies have reduced the prices. 

Another factor which affected the inflation during March was the hike in the LPG prices. It has been increased by ₹50 per cylinder which has an impact of around 8 basis points in the headline Consumer Price Index. 

WPI Inflation 

Not only the retail inflation, but the wholesale price index (WPI) also dipped 2% in March from its February’s level of 2.38%. However, on YoY basis, it is still higher as in March 2024 it was standing at 0.26%. 

Economic Outlook 

With the dip in the Inflation rate in India, the expectation of another rate cut in June is increasing. However, the repo rate following the accommodative stance can remain within 5% to 5.25% as per economists. The inflation in India is now within the targe of RBI, and actually way below the upper cap which indicates towards the success of monetary measures opted by the central bank and a growing economy. 

Source: TheHinduBusinessLine

______________________________________________________________________________________

Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.