NEW DELHI: Wholesale inflation rose to a 13-month high of 1.26% in April compared with 0.53% in the previous month, as food inflation went up further and fuel and power prices increased on a year-on-year basis after a gap of 11 months, according to data released on Tuesday.
“The year-on-year WPI (Wholesale Price Index) inflation hardened to a 13-month high of 1.3% in April 2024 (-0.8% in April 2023) from 0.5% in March 2024, driven by fuel and power, WPI-food (primary food plus manufactured food) and core-WPI (manufactured non-food products) groups,” said Aditi Nayar, chief economist, ICRA.
Experts said the base effect and geopolitical uncertainties could keep wholesale inflation elevated in the coming months. “Going ahead, the base effect will remain adverse over the next two months, thereby resulting in higher WPI inflation” said Rajani Sinha, chief economist, CareEdge. She said external risks emerging from ongoing geopolitical tensions also need to be monitored given their potential impact on supply chains.
Brent crude oil prices had touched $90 per barrel in April.
“ICRA projects the WPI inflation to harden further to 2.0-3.0% in May 2024 (-3.6% in May 2023) owing to an adverse base effect for crude oil and food items,” said Nayar. Consumer inflation is also likely to climb above 5% in May, according to experts.
Consumer inflation eased slightly in April to 4.83% from 4.85% in the previous month, even though food inflation rose to 8.7% from 8.5% earlier.
The gap between WPI and Consumer Price Inflation reduced to a 14-month low of 3.57 percentage points in April.
Experts indicated that higher food inflation is unlikely to make the central bank change its stance in its upcoming June meeting.
The Reserve Bank of India is likely to hold the policy rate at 6.5% for the eighth consecutive time after its monetary policy committee meets on June 5-7, close on the heels of the announcement of general election results, they said.
Sequentially, the WPI was up 0.8% in April, as food prices increased 2.7%, and prices of manufactured products, which account for two-thirds of the weight, were up 0.5%.
Inflation in food articles went up 7.74% in April compared with 6.88% in the previous month, as rice, pulses and vegetables continued to post double-digit price rise.
Paddy inflation rose to 12.03% in April from 11.74% in the previous month, whereas vegetable inflation intensified to 23.6% compared with 19.5% in the previous month. Potato prices were up 72% and onion prices 59.8% compared with 53% and 57%, respectively.
Rising crude prices contributed to the fuel and power category see a price rise on a year-on-year basis after 11 months.
The deflation in manufactured products narrowed to 0.4% compared with 0.9% in the previous month.
“The outlook for food inflation has brightened due to anticipations of a normal monsoon, which is expected to bolster agricultural production. However, monitoring the monsoon’s temporal and spatial distribution is critical,” said Sinha from CareEdge.
CareEdge expects WPI inflation to average around 3% in 2024-25. Wholesale inflation averaged -0.7% in 2023-24.
With inputs from PTI