WPI inflation in April jumps to 15.08%, highest in 17 years; food, fuel prices bite

The spike in inflation is primarily due to rising prices of crude petroleum & natural gas, food articles such as wheat, fruits and vegetables, basic metals and chemical products, the Ministry of Commerce and Industry said Tuesday.

WPI inflation, wholesale inflation
Wholesale inflation in the month of April rose to 15.08 per cent in India.

Wholesale inflation in the month of April rose to 15.08 per cent in India, highest in at least 17 years, government’s latest data showed. “The high rate of inflation in April, 2022 was primarily due to rise in prices of mineral oils, basic metals, crude petroleum & natural gas, food articles, non-food articles, food products and chemicals & chemical products etc. as compared to the corresponding month of the previous year,” the Ministry of Commerce and Industry said Tuesday.

WPI (Wholesale Price Index) inflation, which is the highest since at least April 2005, is also higher than analysts expectations of 14.48 per cent, according to a Reuters poll. This is the 13th month in a row for WPI reading to be in double digits. Earlier in March, WPI inflation was at 14.55%.

Breakdown of WPI inflation: Heatwave led to spike in food prices

Food inflation rose to 8.88 per cent, in terms of major groups. The heatwave led to a spike in prices of perishables such as fruits, vegetables and milk, which along with a spike in tea prices pushed up primary food inflation, Aditi Nayar, Chief Economist, ICRA Limited said. Food accounts for about one-fourth portion of the total WPI basket.

Manufactured goods inflation rose to 10.85 per cent, such as basic metals, chemicals and chemical products. Manufactured goods account for nearly two-third of the total WPI basket.  Out of the 22 groups for manufactured products tracked by the government, 18 groups witnessed increase in prices in April, it said. Fuel and power inflation spiked to 38.66 per cent in April, the government data showed. Even though prices of mineral oils rose in April, there was a fall in prices of electricity last month.

WPI inflation may remain elevated in May, further raising chances of RBI rate hike in June

“With some correction in commodity prices as a result of the bleaker demand outlook in China offsetting the depreciation in the INR, the WPI inflation may recede mildly below 15% in May 2022, while remaining uncomfortably elevated,” ICRA Limited’s Aditi Nayar said. ICRA said the probability of a repo hike in the June 2022 review of monetary policy has risen further. 

“We expect a 40 bps hike in June 2022 followed by a 35 bps rise in August 2022, amidst a terminal rate of 5.5% to be reached by mid-2023. With the source of inflation being global supply issues and not exuberant domestic demand, we maintain our view that overtightening will douse the fledgling recovery without having a commensurate impact on the origins of inflationary pressures,” Nayar added. Earlier this month, RBI in an off-cycle meeting hiked repo rate by 40 basis points in order to tame rising inflation.

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