Inflation falls to 5.96%, lowest in 40 months

Pressured by almost overall downward pressure and deflation in vegetables, the Wholesale price index (WPI) inflation fell to around 40-month low of 5.96 % in March from 6.84 % in the previous month, much lower than RBI's projection of 6.8 %. This leads to demand from various quarters for a cut in the policy rate by RBI in its May monetary policy to perk up growth rate which fell to estimated decade low of five % in 2012-13.

Inflation was lower than this figure in December 2009 when it had stood at 4.95%.   

Analysts had expected a fall in the rate of price rise in March, but not below six %. In March, 2012 inflation had stood at 7.69 %, so high base theory also could not substantiate the fall in inflation. 

Addressing its first press conference after assuming the charge of the Confederation of Indian Industry, Kris Gopalakrishnan called for a 100 basis-point cut in the policy rate in the current financial year with “immediate” 50 bps cut. 

However, there was a catch in official provisional numbers, released for March today. The January inflation figure was revised  to 7.31 % from the provisional estimate of 6.62 %, a change of 0.69 %.  

Inflation averaged 7.3 % in 2012-13, sharply lower than 8.9 % in the previous financial year. This prompted Planning Commission deputy chairman Montek Singh Ahluwalia to say, "The fact that this is the first time (in over 3 years) it is below 6 %, is very important and I hope that we will continue to see that often." 

Food inflation, a cause of worry for policy makers, declined to a single digit of 8.73 % in March from 11.38 % in February. Besides,  vegetables saw deflation (negative inflation) of 0.95 % in March. However, most protein-based items like pulses and non-vegetarian stuff still  saw inflation in double digits, even though the rate of price rise came down. 

Fuel and power category showed only a marginal decline in inflation as the rate of price rise in diesel rose to 21.22 % in March against 19.19 % in February.  

Inflation in manufactured items, which constitutes 65 % of WPI, came down to 4.07 % in March from 4.51 % in February. 

The core inflation (in manufactured items sans food products), which many say should be focused by the RBI while deciding on the policy rate, fell to a 36-month low of 3.41 % compared to 3.77 %. 

Amid the call for the RBI to cut the policy rate, it should be noted that the retail price inflation still stood in double digits, though it moderated in March, 2013. It fell from 10.91 % in February to 10.39 % and averaged 10.20 % in 2012-13.

To a query as to why should RBI cut rate when CPI inflation is in double digits, the CII president said the issue of retail price pressures should be addressed through supply side measures.

From Our Archives

Feb 2013| Inflation rises to 6.84%


Jan 2013 | Inflation eases to 6.62%, lowest level in over 3 years


Dec 2012 | WPI eases to 7.18%, CPI rises to 10.56%


Nov 2012 | Inflation eases to 7.24%


Oct 2012 | Inflation eases to 7.45%


Sept 2012 | Inflation eases marginally to 9.72%