Inflation in India’s wholesale prices hit a four-month high of 14.55% in March, from 13.11% in February, driven by accelerating price rise across all categories of goods, with fuel and power as well as primary articles driving most of the gains.
This is the 12th month in a row that wholesale inflation has exceeded 10%. Fuel and power inflation surged to a three-month high of 34.5% in March, from 31.5% in February, while inflation in primary articles accelerated to 15.54% from 13.39%.
The month-on-month rise in the fuel and power index was 5.68%, more than double February’s 2.7%. The sharp rise in fuel and power inflation was triggered mainly by an uptick in electricity prices, Morgan Stanley economists Upasana Chachra and Bani Gambhir said in a note.
Wholesale price inflation, which was at 7.89% in March 2021, had hit a record high of 14.9% in November 2021 and was at 14.3% in December. It had eased below the 14% mark in January and February.
While retail inflation had hit a 17-month high of 6.95% in March, largely due to higher food prices, the wholesale food price index inched up marginally to 8.71%, from 8.47% in February. “This was on the back of a sharper rise in the prices of manufactured food articles even as primary food prices remained stable,” Ms. Chachra and Ms. Gambhir said.
The high inflation this March was attributed ‘primarily to rise in prices of crude petroleum and natural gas, mineral oils, basic metals, etc. owing to disruption in global supply chain caused by Russia-Ukraine conflict’, the Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade, said in a statement.
Terming the broad-based spike in wholesale inflation ‘higher than expected’, ICRA chief economist Aditi Nayar said the jump in crude oil prices was the biggest contributor to the rise in inflation in March relative to February, followed by fuels and core items.
“We expect the inflation measured by the Wholesale Price Index (WPI) to remain in the range of 13.5% to 15% in April, partly depending on where crude oil prices settle in the rest of April 2022 and how much petrol and diesel prices are revised further,” she said.
Even core inflation, which excludes volatile energy and food prices, hardened by a sharp 2.2% in March over February 2022 to hit 10.9%. “Only four of the 21 sub-groups of the core index escaped a month-on-month rise in March 2022, namely beverages, other transport equipment, wearing apparel and pharmaceutical products,” Ms. Nayar pointed out.
Manufactured products inflation moved up from 9.84% to 10.71%. However, the month-on-month change in the index for manufactured goods was sharper at 2.31%.
While this reflects producers passing through input cost increases, Acuité Ratings and Research expects this trend to persist as both consumption demand and producers’ profit margins remain under pressure and supply side bottlenecks as well as high commodity prices are expected to linger.
“The inflation levels would have been slightly higher had there not been a sequential moderation in the wholesale food category which, however may start getting reversed over the next few months,” said the firm’s chief analytical officer Suman Chowdhury, emphasising that the WPI numbers reinforce the presence of strong price pressures across the manufacturing and services sectors.
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