April saw the fourth straight month of reduced food inflation, even as the government released a truncated data for the month due to lack of available numbers and limited wholesale transactions amid a nationwide lockdown.
According to the official data released on Thursday, wholesale inflation in the first month of 2020-21 could not be captured due to the spread of the Covid-19 pandemic. “It has been decided to release the price movement of selected sub-groups/groups of the Wholesale Price Index (WPI), following the principles of adequacy,” said the commerce ministry.
WPI had reduced to a four-month low of 1 per cent in March, down from February’s 2.3 per cent. India’s wholesale inflation had remained relatively volatile since late last year. Economists said the low inflation had come amid a low response rate, and was contrary to expectations of disinflation.
However, food inflation in April reduced to 3.6 per cent, down from March’s 4.9 per cent. Food inflation has been in a downward spiral since December, when it hit a high of 13.3 per cent. The reduction in the rate of food price rise is expected to benefit sections of the rural and urban poor, at a time when the country has been under nationwide lockdown since March 25. There have been reports of low availability of foodgrain in some areas, as supply chains for these goods have been disrupted.
“Food inflation displayed a divergent trend at the wholesale and retail levels in April. The decline in WPI food inflation is encouraging and suggests that the spike in retail food inflation was largely driven by disruption related to the lockdown. Vegetables were a major driver of the downtrend in the wholesale food inflation in April, suggesting that their perishable nature — amid uncertain demand during the lockdown — contained the normal seasonal uptick seen with the rise in temperatures,” said Aditi Nayar, principal economist, ICRA.
Elsewhere, major deflationary pressure rose in the fuel and power segment, which saw prices fall by more than 10 per cent, following marginal fall of 1.7 per cent in March.
The government didn’t release the inflation figures for manufactured products, which have a combined weighting of 65 per cent in the index.
In the previous month, prices in the sector had risen by just 0.3 per cent, after rising by 0.4 per cent in February. However, in the latest month, the sectors are expected to have seen mixed performance.
“Of the six sub-components of the manufacturing index for which the data is available, three components have seen an increase in inflation on a year-on-year basis, while the other three have seen a fall. Basic metals, having the highest weighting (9.65 per cent) in the manufacturing index, contracted 4.3 per cent in April. Even chemicals, having a weighting of 6 per cent, have contracted by 2.6 per cent during the month,” CARE Ratings said after analysing the data.
Eleven of the 17 components within manufactured products recorded contraction in March.
Experts predict wholesale inflation will continue to remain low on account of low commodity prices globally. Among these, international crude oil prices and metal prices on account of weak global demand conditions were highlighted by CARE Ratings.