India's Wholesale Inflation Turns Negative For First Time Since June 2020

The inflation rate has been easing and in March it was at 1.34 per cent against 3.85 per cent in February.
India's Wholesale Inflation Turns Negative For First Time Since June 2020
India's Wholesale Inflation Turns Negative For First Time Since June 2020Representative Image

For the first time since three years, the wholesale inflation in India based on the Wholesale Price Index (WPI) has turned negative in the month of April at minus 0.92 percent, official data released by the Ministry of Commerce and Industry showed.

Notably, the last time it happened was back in July 2020.

The inflation rate has been easing and in March it was at 1.34 per cent against 3.85 per cent in February.

In October, the overall wholesale inflation was at 8.39 percent and has been falling since then. Notably, the WPI-based inflation had been in double digits for 18 months in a row till September.

A declining trend was witnessed in April that was mainly attributed to the decline in food articles, cereals, wheat, vegetables, potato, fruits, eggs meat and fish, minerals, crude petroleum and natural gas, and steel, among others.

Meanwhile, retail inflation in India too eased sharply in April to 4.7 per cent or an 18-month low, as against 5.7 per cent the previous month.

India's retail inflation was above RBI's 6 per cent target for three consecutive quarters and had managed to fall back to the RBI's comfort zone only in November 2022.

Under the flexible inflation targeting framework, the Reserve Bank of India (RBI) is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 per cent range for three quarters in a row.

The RBI, in its first monetary policy review meeting this fiscal in April, decided to keep the key benchmark interest rate -- the repo rate (the rate at which the RBI lends to other banks) -- unchanged at 6.5 per cent, to assess the effects of the policy rate tightening done so far.

Barring the recent pause, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation.

It is pertinent to mention that the raising of interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

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