NEW DELHI: Led by a steep rise in energy prices amid the ongoing West Asia crisis, India’s wholesale price index (WPI)-based inflation rate more than doubled to a 42-month high of 8.3 per cent in April from 3.88 per cent in March, according to data released by the Ministry of Commerce and Industry on Thursday.
Wholesale price inflation was last higher in October 2022, when it stood at 8.67 per cent. In the second full month of the crisis, inflation in the fuel segment surged to 24.71 per cent, compared to 1.05 per cent in the previous month. Crude petroleum recorded a sharp spike of 88.06 per cent in April from 51.57 per cent in March. Within the fuel and power group, prices of aviation turbine fuel (142 per cent), petrol (32.4 per cent), high-speed diesel (25.19 per cent), and liquefied petroleum gas (10.92 per cent) rose sharply in April.
The month-on-month change in the WPI accelerated to 3.86 per cent in April from 1.52 per cent in March, reflecting a sharp buildup in sequential price pressures. The rise was driven primarily by the fuel and power segment, which recorded an 18.22 per cent monthly jump. Primary articles increased 2.58 per cent, while manufactured products registered a relatively moderate sequential increase of 1.4 per cent.
Madan Sabnavis, chief economist at Bank of Baroda, termed the multi-year high print the “first sign of the impact of war on the Indian economy”. He said the numbers also reflected the pressure on the government to raise retail fuel prices.
The impact of the West Asia crisis was also visible in non-fuel items, with non-food manufacturing inflation rising to 5 per cent in April from 3.7 per cent in March. Price pressures were evident in basic metals, textiles, chemicals, and electrical equipment.
“The crisis has impacted not only energy prices but also chemicals and metals. Moreover, there has been a surge in global freight costs, which will affect all imported items,” said Gaura Sen Gupta, chief economist at IDFC First Bank.
Megha Arora, director at India Ratings & Research, said high global metal prices, the potential El Niño effect, and higher imported input costs were likely to keep manufacturing inflation elevated in the coming months.
Rajani Sinha, chief economist at CareEdge Ratings, said a higher probability of an El Niño event this year could pose upside risks to food inflation. Food inflation rose marginally to 1.98 per cent in April from 1.9 per cent in March. “With the war showing no signs of abating, even the current ceasefire conditions would still keep prices in the $100-120 per barrel range, which will keep WPI inflation elevated,” Sabnavis said.
He added that WPI inflation would remain high in the coming months unless international crude oil prices corrected meaningfully. “While WPI inflation is not a target for the Reserve Bank of India’s (RBIs’) Monetary Policy Committee, it is known that, with a lag, these prices get transmitted to Consumer Price Index through higher input costs. Therefore, these numbers remain important for policy formulation,” he said.
Retail inflation rose only marginally to 3.48 per cent in April from 3.4 per cent in March, as the government resisted raising retail fuel prices. Looking ahead, CareEdge expects WPI inflation to average around 7.8 per cent in 2026-27 under its base-case scenario, assuming global crude oil prices average around $90 per barrel, with a prolonged period of elevated oil prices leading to some pass-through to consumers.
“We expect the RBI to maintain status quo on policy rates. Given lingering concerns around growth, the central bank is unlikely to rush into reversing the current rate cycle,” Sinha added.
Source: Business Standard
