New Delhi: Official data released by the Ministry of Commerce and Industry reveals that India’s wholesale inflation, based on the Wholesale Price Index (WPI), turned negative in April, registering a decline of -0.92%. This marks the first instance of negative wholesale inflation since July 2020.
The easing trend in wholesale inflation has been observed over the past months, with March recording a rate of 1.34% compared to 3.85% in February. Notably, wholesale inflation had remained in double digits for 18 consecutive months until September. The decline in April’s inflation can be attributed to various factors, including a decrease in food articles, cereals, wheat, vegetables, potatoes, fruits, eggs, meat, fish, minerals, crude petroleum, natural gas, and steel, among others.
Simultaneously, retail inflation in India also experienced a significant decline in April, reaching a 18-month low of 4.7% compared to the previous month’s 5.7%. Previously, India’s retail inflation had exceeded the Reserve Bank of India’s (RBI) target of 6% for three consecutive quarters before finally falling within the RBI’s comfort zone in November 2022.
Under the flexible inflation targeting framework, if the Consumer Price Index (CPI)-based inflation remains outside the 2-6% range for three consecutive quarters, the RBI is deemed to have failed in managing price rises. In April, during its first monetary policy review meeting of the fiscal year, the RBI opted to maintain the key benchmark interest rate, known as the repo rate, at 6.5% to evaluate the impact of previous rate hikes on the economy.
Except for the recent pause, the RBI has cumulatively raised the repo rate by 250 basis points since May 2022 as part of its efforts to combat inflation. Increasing interest rates is a monetary policy tool typically used to suppress demand in the economy, thus contributing to a decline in the inflation rate.
