WPI inflation eases to 4-year low at 1% in FY20

The Wholesale Price Index (WPI)-based inflation eased for the third month in a row in March 2020 to 1 per cent, lowest in the past four months and a four-year low for the full financial year 2019/20. The inflation during the first two months of the year declined from 3.5 per cent to 2.3 per cent and was lower than 3.1 per cent in March 2019.

Lower print for WPI-based inflation was on account of broad-based moderation across segments along with deflation in fuel and power. Primary articles inflation was lower at 3.7 per cent in March against the 4.9 per cent growth a month ago. The slower growth in inflation was led by food articles (4.9 per cent), especially cereals, paddy, vegetables, fruits and non-food especially crude oil. Within food, the prices of pulses rose by 12.12 per cent as against 11.42 per cent a month ago while onion prices remained elevated (112.3 per cent). "Supply constraints and stocking activities by consumer amid COVID-19 led lockdown partly pressured prices," said a CARE Ratings report.

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Build up inflation rate in the financial year 2020 was 1 per cent, lowest in the past four years compared to a build-up rate of 3.1 per cent in the corresponding period of the previous year. During April to October 2019, the wholesale inflation moderated steadily by 3.2 percentage points. The inflation rate was 2.9 per cent and 1.7 in the previous two fiscals.

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While the food inflation remained near stable, non-food segment registered notable decline in FY20. "During the year, pricing power of the corporates moderated considerably led by sluggish demand conditions domestically, decline in prices of metals and lower exports. Some part of softening in prices is also related to recent growth scare amid COVID-19," the report added.

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