Capital Market conducted the poll amongst economists for their projections of inflation figure for March 2024. As per the results of poll, the inflation rate is projected to accelerate to 0.7% in March 2024. Economists in the poll have projected WPI inflation in the range of 0.5-1.5% for March 2024. The median of the economists forecast's for inflation of March 2024 stood at 0.7%, while the average was higher at 0.9% for March 2024.

CPI Inflation: March 2024

The all-India general CPI inflation declined to 4.85% in March 2024 (new base 2012=100), compared with 5.09% in February 2024. The corresponding provisional inflation rate for rural area was 5.45% and urban area 4.14% in March 2024 as against 5.34% and 4.78% in February 2024. The core CPI inflation declined to 3.26% in March 2024 compared with 3.39% in February 2024. The cumulative CPI inflation has eased to 5.36% in April-March FY2024 compared with 6.65% in April-March FY2023.

Among the CPI components, inflation of food and beverages declined to 7.68% in March 2024 from 7.76% in February 2024. Within the food items, the inflation for vegetables declined to 28.34%, spices 11.40%, fruits 3.07% and milk and products 3.38%. Further, the inflation for pulses and products eased to 17.71%, prepared meals, snacks, sweets etc. 3.58%, egg 10.33%, non-alcoholic beverages 2.79% and sugar and confectionery 7.25%. However, the inflation for oils and fats increased to (-) 11.72%, cereals and products 8.37% and meat and fish 6.36% in March 2024.

The inflation for housing declined to 2.77%, while that for miscellaneous items eased to 3.50% in March 2024. Within the miscellaneous items, the inflation for transport and communication declined to 1.52%, health 4.34%, household goods and services 2.70% and education 4.69%, while the inflation for personal care and effects increased to 6.02% and recreation and amusement 2.76% in March 2024.

The inflation for clothing and footwear declined to 2.97%, while the CPI inflation of fuel and light eased to (-) 3.24% in March 2024.

WPI Inflation: February 2024

The Wholesale Price Index (WPI)-based inflation, base year 2011-12, declined to 0.2% in February 2024 from 0.3% in January 2024. Inflation for fuel and power group and manufactured products group declined contributing to the overall dip in inflation in February 2024. The core inflation (manufactured products excluding foods products) dipped to (-) 1.3% in February 2024 from (-) 1.0% January 2024.

The WPI inflation is revised upwards to 0.9% for December 2023 from 0.7% reported at provisional level.

Inflation of primary articles rose to 4.5% in February 2024 from 3.8% in January 2024. However, the inflation for fuel and power group inflation declined to (-) 1.6% from (-) 0.5% in January 2024. Further, manufactured products inflation dipped to (-) 1.3% in February 2024 from (-) 1.1% in January 2024.

Inflation of food items (food articles and food products) increased to 4.1% in February 2024 from 3.8% in January 2024. Meanwhile, inflation of non-food items (all commodities excluding food items) fell to (-) 1.3% in February 2024 from (-) 1.1% in January 2024.

The contribution of primary articles to the overall inflation of 0.2% rose to 117 basis points (bps) in February 2024, from contribution of 101 bps to 0.3% inflation in January 2024. The contribution of fuel product group fell to (-) 22 bps against (-) 7 bps in January 2024, while that of manufactured products declined to (-) 77 bps in February 2024 from (-) 68 bps in January 2024.

The contribution of food items (food articles and food products) to inflation of 0.2% in February 2024 increased to 113 bps from 105 bps to 0.3% in January 2024. Meanwhile, the contribution of non-food items (all commodities excluding food items) dipped to (-) 95 bps in February 2024 from (-) 80 bps in January 2024.

FAO Food Price Index: March 2024

Rising international quotations for vegetable oils, dairy products and meat pushed the benchmark index for world food commodity prices up by 1.1% in March, its first increase in seven months, as per the Food and Agriculture Organization of the United Nations (FAO). The FAO Food Price Index, which tracks monthly changes in the international prices of a set of globally-traded food commodities, declined 7.7% from its corresponding value one year ago.

The FAO Vegetable Oil Price Index led the increase in March, rising 8.0% from February and reaching a one-year high as quotations for palm, soy, sunflower and rapeseed oils all rose. International palm oil prices increased due to seasonally lower outputs in leading producing countries and firm domestic demand in Southeast Asia, while those for soyoil recovered from multi-year lows, boosted by robust demand from the biofuel sector, particularly in Brazil and the United States of America.

The FAO Dairy Price Index increased for the sixth consecutive month, up 2.9% from February, led by rising world cheese and butter prices.

The FAO Meat Price Index also increased, rising 1.7% from the previous month, with international prices up for poultry, pig and bovine meats.

The FAO Cereal price Index declined 2.6% over February 2024, while averaging 20% below its March 2023 value. The drop was led by decreasing global wheat export prices, which declined due to ongoing strong export competition - underscored by cancelled purchases by China - among the European Union, the Russian Federation and the United States of America. Maize export prices edged upwards in March, partly due to logistical difficulties in Ukraine, while the FAO All Rice Price Index dipped by 1.7% amid subdued global import demand.

The FAO Sugar Price Index declined by 5.4% from February, with the drop mainly driven by an upward revision to the 2023/24 sugar production forecast in India and the improved pace of the harvest in Thailand.

Outlook

The WPI inflation declined in February 2024 along with the moderation in the core inflation. The CPI inflation has further declined in March 2024. As per the RBI, the food price uncertainties would continue to weigh on the inflation outlook. An expected record rabi wheat production in 2023-24, however, will help contain cereal prices. Early indications of a normal monsoon also augur well for the kharif season. On the other hand, the increasing incidence of climate shocks remains a key upside risk to food prices. Low reservoir levels, especially in the southern states and outlook of above normal temperatures during April-June, also pose concern. Tight demand supply conditions in certain pulses and the prices of key vegetables need close monitoring. Fuel price deflation is likely to deepen in the near term following the recent cut in LPG prices. After witnessing sustained moderation, cost push pressures faced by firms are showing upward bias. The recent firming up of international crude oil prices warrants close monitoring. Geo-political tensions and volatility in financial markets also pose risks to the inflation outlook.