India's annual inflation rate, based on wholesale prices, eased to 1 per cent in March from a rise of 2.26 per cent in February, official data showed on Wednesday.
The fall in March has largely been on account of a sharp fall in food prices in the country. Food inflation in March fell to 4.91 per cent from 7.79 per cent in the previous month.
On a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry on Monday showed a decelerating trend during March, as inflation had risen to 3.10 per cent during the corresponding month of 2019.
"Build up inflation rate in the financial year so far was 1 per cent compared with a build up rate of 3.10 per cent in the corresponding period of the previous year," the ministry said in its review of 'Index Numbers of Wholesale Price in India' for March.
The rate of inflation based on WPI Food Index consisting of 'Food Articles' from Primary Articles group and 'Food Product' from Manufactured Products group decreased from 7.31 per cent in February 2020 to 5.49 per cent in March 2020.
Also, the index for manufactured goods remained static in March, but for the fuel and power category fell by 3.1 per cent. The index of food article group also declined by 2.1 per cent. It remained static in manufacturing.
For January 2020, the annual rate of inflation based on the final index stood at 3.52 per cent as compared with 3.10 per cent (provisional) respectively as reported in February.
On Monday, another set of data showed that a drop in food prices decelerated the rise in India's retail inflation during March to 5.91 per cent from February's 6.58 per cent.
However, the consumer price index (CPI), or retail inflation, was at 2.86 per cent in the corresponding month of last year.
The data showed that even though the consumer food price index remained at an elevated level, its rise was slower during March at 8.76 per cent, compared with 10.81 per cent recorded in February 2020 and 0.30 per cent in the corresponding period of last year.
"Amid a low response rate, the WPI recorded an inflation of 1 per cent for March 2020, in contrast to our expectation of a disinflation of 0.6 per cent. This divergence appears to have been led by minerals, crude oil and natural gas, with the index levels not fully reflecting the plunge in commodity prices that has taken place in the aftermath of the Covid-19 outbreak," said Aditi Nayar, Principal Economist, ICRA.
"The inflation for food and core items in March 2020 is largely in line with our forecasts. For April 2020, while food inflation may undergo an uptick, the lagged correction in prices of various commodities would push the WPI into disinflation."
"At present, we expect the WPI to record a disinflation of 1.5 per cent in FY2021, in contrast to the mild inflation of 1.7 per cent in FY2020."