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WPI inflation soars to 14.55% in March, 4-month high, hurt by high oil prices amid Russia Ukraine war

“Supply shortages and price increases in a number of input goods due to the Russia-Ukraine conflict will keep domestic inflation high in the coming months, setting the stage for-front loaded monetary policy tightening by the central bank,” Barclays said.

WPI, WPI inflation
The latest Wholesale Price Index (WPI) inflation figure is a tad below the wholesale inflation in November, which was at 14.87%.

Wholesale price inflation in the country jumped to 14.55% in March, a four-month high, primarily due to rising crude oil and commodity prices owing to disruption in global supply chain caused by Russia-Ukraine conflict, per the government data released on Monday. The latest Wholesale Price Index (WPI) inflation figure is a tad below the wholesale inflation in November, which was at 14.87%. WPI inflation has now remained in double digits for 12 months in a row.

“The WPI inflation recorded a broad-based and higher than expected increase to a four-month high 14.6% in March 2022, following the spike in commodity prices amidst the escalating Russia-Ukraine conflict,” Aditi Nayar, Chief Economist at ICRA said. The jump in crude oil prices was the biggest contributor to the rise in the WPI inflation in March 2022 relative to the previous month, she added. Inflation in crude petroleum spiked to 83.56 % in March, from 55.17 % during February, according to data released by the Ministry of Commerce and Industry.

“The core WPI recorded a broad-based and massive 2.2% jump in sequential terms in March 2022, a fallout of the geopolitical tensions, with the inflation rate rising to 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,” ICRA’s Nayar added.

Inflation in primary articles, such as vegetables, edible oil and milk, was at 15.54% in March, as compared to 13.39% in preceding month. Inflation in manufactured items rose to 10.71% in March, compared to 9.84 per cent in February, while inflation in the fuel and power basket jumped to 34.52 % in March, against 31.50% in February.

“With the onset of summer, rise in food prices will likely add to higher prices for fuel and manufactured commodities in the coming months. Supply shortages and price increases in a number of input goods due to the Russia-Ukraine conflict will keep domestic inflation high in the coming months, setting the stage for-front loaded monetary policy tightening by the central bank,” Rahul Bajoria, MD & Chief India Economist, Barclays said.

Rupa Rege Nitsure, Chief Economist at L&T Financial Services, told CNBC TV18 that there were expectations that favourable base case scenario will tilt in favour of WPI, but high edible oil, fertilizer, and minerals prices have had a relatively higher impact on inflation, as reflected in the numbers. “WPI and CPI will be very ugly in the month of April. On an average in FY 2023, CPI inflation will be about 7%, due to stagflationary impact, and RBI will go for more aggressive tightening,” she added.

ICRA’s Nayar sees WPI to be in the range of 13.5% to 15% in the month of April, partly depending on where crude oil prices settle in the rest of the month and how much petrol and diesel prices are revised further. She expects the broad-based nature of the rise in WPI inflation to be of concern to the RBI’s monetary policy committee. “We see a growing probability of the first repo hike being preponed to June 2022,” she added.

Data released last week showed that CPI (consumer price index) inflation spiked to 6.95 per cent in March to a 17-month high, and the third consecutive month that the retail inflation has breached the RBI’s upper tolerance limit of 6%.

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