The Ministry of Commerce and Industry has released official data indicating that wholesale inflation in India, as measured by the Wholesale Price Index, fell to minus 0.92 percent in April.For the first time since July 2020, wholesale inflation in India has turned negative. The rate of wholesale inflation has been gradually decreasing, with March recording 1.34 percent compared to 3.85 percent in February.Since October, overall wholesale inflation in India has been declining. It was at 8.39 in October and has been falling since then. It is worth noting that wholesale price index (WPI)-based inflation had remained in double digits for 18 consecutive months until September.Image: https://tse2.mm.bing.net/thid=OIP.b5_Qhoqad-YCX07fsbOlRQHaDU&pid=Api&P=0The decline in inflation in April can be primarily attributed to various factors such as a decrease in the prices of food articles, including cereals, wheat, vegetables, potatoes, fruits, eggs, meat, and fish. Additionally, a decline in prices of minerals, crude petroleum, natural gas, and steel also contributed to the overall decrease in inflation.In April, retail inflation in India witnessed a significant easing, reaching a low of 4.7 percent, which is the lowest in the past 18 months. This is a notable decrease from the previous months figure of 5.7 percent. Retail inflation in India had consistently remained above the Reserve Bank of Indias target of 6 percent for three consecutive quarters, but it managed to fall back within the RBIs comfort zone in November 2022.Image: https://tse4.mm.bing.net/thid=OIP.O5FYKalh58NAEWPjiwKLmAHaEK&pid=Api&P=0According to the flexible inflation targeting framework, if the Consumer Price Index (CPI)-based inflation remains outside the range of 2-6 percent for three consecutive quarters, it is considered a failure in managing price rises by the Reserve Bank of India (RBI).In its first monetary policy review meeting of the fiscal year in April, the Reserve Bank of India (RBI) opted to maintain the repo rate at 6.5 percent, keeping it unchanged to evaluate the impact of previous policy rate increases. Apart from this recent pause, the RBI has raised the repo rate by a total of 250 basis points since May 2022 as part of its efforts to combat inflation.Increasing interest rates is a common monetary policy tool used to dampen economic demand, which in turn contributes to reducing the inflation rate.
