March inflation almost unchanged at 9.9%

India's inflation, as measured by the wholesale price index (WPI), surprisingly stayed almost unchanged in March at 9.90% as compared to 9.89% in February. Economists had expected inflation to exceed the 10% mark in March. The official WPI for 'All Commodities' for March 2010 rose by 0.3% to 250.8 from 250.1 for the previous month. Inflation was at 1.20% during the corresponding month of the previous year. Meanwhile, the Government announced that it has revised January's inflation figure to 9.44% as against 8.56% forecast earlier. So, don't be surprised if the February and March inflation readings are also revised higher in the coming months. Indian bonds pared losses as after inflation in March remained more or less steady as against expectations of a double-digit figure. The yield on the benchmark 10-year note declined to 8.09% from 8.12%, the most since October 2008.

Inflation in the Primary Articles group stood at 14.10% in March as against 15.54% in February. Food inflation declined to 16.65% from 17.79% in February. Inflation also dropped in the Non-food Articles space to 12.77% from 13.35% in the previous month. However, inflation in Food & Power group rose to 12.71% from 10.19% in February. Inflation in the Mineral Oils sub-group jumped to 17.02% in March from 14.38% in February. Inflation in Electricity sub-group also rose to 4.72% from 1.95% in February. In the Manufactured Products group, inflation stood at 7.13% versus 7.42% in February. Inflation in the Food Products sub-group fell to 16.98% from 20.43% in February. But, inflation increased in the Textiles, Chemicals, Beverages & Tobacco and Machinery & Tools segments.

Though inflation did not surpass the double-digit mark in March as was feared by policymakers and analysts alike, it is likely to remain elevated at the current level for another two months, Finance Minister Pranab Mukherjee said. "Of course, the apprehension was that it may reach the double-digit figure in March. So it has moderated to some extent but you will have to see that till the month of June, this pressure will continue," Mukherjee told reporters in New Delhi. The Finance Minister said that inflation will soften after the Rabi crop harvesting is complete sometime next month and if the southwest monsoon this year turns out to be good. It may be recalled that monsoon was below par last year, hitting farm output and adding pressure to food prices.