Wholesale price inflation jumps to 3-year high of 3.88% in March

High energy prices to push WPI inflation above 4 per cent in April: Analysts

New Delhi: India's wholesale price inflation rose to an over three-year high of 3.88 per cent in March, driven by surge in prices of fuel and manufactured products amid supply chain disruptions due to West Asia conflict, as per official data released on Wednesday.

This is the fifth consecutive month of rise in inflation based on the Wholesale Price Index (WPI). It stood at 2.13 per cent in February.

The WPI inflation in primary articles, which include crude petroleum, natural gas, minerals and food articles, surged to 6.36 per cent in March from 3.27 per cent in the previous month. Manufactured products, which has 64.23 per cent weight in the WPI, recorded 3.39 per cent inflation in March against 2.92 per cent recorded in February.

The impact of high global crude price was evident in the primary articles category that nearly doubled to 6.36 per cent with inflation in crude petroleum recorded at 51.57 per cent, unlike deflation in the previous months.

“This reversal in crude inflation trajectory accompanied with the higher weightage assigned to it in the WPI basket, exerted an upward pressure on the headline inflation,” said Megha Arora, Director at India Ratings & Research.

Fuel and power recorded a similar trajectory from deflation to inflation on account of higher price of petrol and high-speed diesel. In the manufacturing group, while several sub-groups witnessed inflation, food products, chemicals and textiles exerted upward pressure, Arora said.

The month over month change in WPI for March stood at 1.64 per cent. Fuel and power segment recorded a 4.13 per cent jump in March over the previous month, data released by the Ministry of Commerce and Industry showed.

According to India Ratings & Research, the WPI inflation is likely to increase further to 4.7 per cent in April, due to transmission of high energy prices to the manufacturing sector.

WPI is expected to be higher than the CPI on account of greater weight of fuels in the WPI index. A possible reescalation in West Asia conflict leading to higher price of crude and edible oil, along with currency depreciation will pose the upside risk to inflation. In the medium term, the El Nino effect is expected to increase food prices, Ind-Ra said.

Out of the 22 groups for manufactured products, 16 groups witnessed an increase in prices and 6 groups witnessed a decrease in prices in March over the previous month.

Some of the important groups that showed month-over-month increase in prices were manufacture of food products, chemicals and chemical products, basic metals, textiles and other manufacturing.