India's wholesale price index (WPI) inflation slipped into the negative territory for the first time since July 2020. The inflation came in at -0.92% falling largely due to base effect.
The food price inflation in April dropped significantly to 0.17 percent from March's 2.32 percent. The manufactured products inflation declined 2.42 percent slipping deep in the negative zone while primary articles and fuel & power inflation in at 1.6 and 0.9 percent respectively.
The all-commodities index of the WPI was unchanged in April from March.
The WPI inflation has been falling for some time now with the figure dropping to 1.34 per cent in March. It was at 3.85 per cent in February and 4.73 per cent in January.
The fall in WPI is likely to have a positive impact on retail prices as well in terms of cooling them down. India Consumer Price Index (CPI)-based inflation softened sharply in April, hitting an 18-month low of 4.70 percent.
The RBI's MPC takes into account the CPI index for arriving at the monetary policy decisions. A lower CPI print for April means that the RBI could keep interest rates unchanged in the June policy depending on how the trajectory pans out until then.
Retail inflation is expected to ease further in the month of May aided by a decline in food prices, according to a Reuters report. The inflation could come close to the 4% mark, which is the midpoint of the tolerance band set by the RBI.
"Our analysis places May CPI inflation tracking around 4%, which suggests the Q2 (April-June) average is likely to undershoot the RBI's forecast of 5.1% by as much as 60 basis points," the report quoted from a Nomura note by economists Sonal Varma and Aurodeep Nandi.
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