WPI inflation to be in negative zone in March: D&B

It expects the WPI inflation to be in the range of -0.2% to -1.8% during March 2015

The headline WPI inflation is expected to be in the range of -0.2% to -1.8% during March this year driven by weak demand conditions and lower commodity prices, says a report.

According to a report by research firm, Dun & Bradstreet, though food price levels might witness a rebound in the coming months, weak demand conditions coupled with lower commodity prices are likely to keep inflationary pressures subdued for the fifth consecutive month.

D&B expects the WPI inflation to be in the range of -0.2% to -1.8% during March 2015.

According to official figures, the wholesale inflation dipped to -2.06% in February as prices of food articles, manufactured items and fuel products fell during the month. This was the fourth month in a row that WPI-based inflation remained in negative zone.

According to D&B, food price levels might witness a rebound as foodgrain production is estimated to have declined during 2014-15. Besides, in states like Maharashtra, foodgrain production has suffered due to drought and other natural calamities.

Notwithstanding these factors, inflation is likely to stay at lower levels owing to weak demand and lower commodity prices including that of fuel.

Commenting on the findings, Dun & Bradstreet India Senior Economist Arun Singh said "Decentralisation and setting a target for inflation as per the monetary policy framework agreement between the central bank and the Union government are two landmark changes being ushered in the recent period".

Singh further said: "It remains to be seen to what extent easing of repo rates are translated into higher credit outflows as NPA levels still remain high".

On March 4, the RBI surprised markets by reducing the benchmark interest rate by 0.25% to 7.5% on the back of softening inflation and the government's commitment to continue the fiscal consolidation programme.

This was the second time in two months that the RBI cut interest rates outside the regular policy reviews. Last time on January 15, it had cut the repo rate by 0.25% to 7.75%.

The RBI is scheduled to announce its next bi-monthly policy statement on April 7.