India’s Wholesale Inflation Hits 13 Month High | Food, Fuel, Power

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India’s Wholesale Inflation Hits 13-Month High | Food, Fuel, Power: In April, wholesale inflation in India surged to a 13-month high of 1.26%, marking a significant increase from 0.53% in March. This surge was primarily driven by soaring prices of food articles and a rebound in fuel costs, following a year-on-year increase of 1.4% in fuel and power costs after months of deflation.

Drivers of Inflation: Food and Fuel

• Soaring Food Prices

Food articles experienced a notable increase, with vegetables leading the surge at 23.6%. Additionally, prices of potatoes and onions witnessed substantial rises, jumping 72% and 60% respectively.

• Fuel and Power Costs

Inflation in the fuel and power basket also saw a significant uptick, reaching 1.38% in April from the previous month’s (-)0.77%.

Outlook and Forecasts

Experts anticipate continued inflationary pressures due to factors like the base effect and geopolitical tensions. ICRA forecasts the average Wholesale Price Index (WPI) for the current fiscal year to stand at 3.3%, with expectations of further increases in the coming months, possibly exceeding 2% by May and June.

Impact on Policy and Economy

While the rise in wholesale inflation contrasts with the retail inflation data, which eased to an 11-month low of 4.83% in April, the Reserve Bank of India (RBI) has maintained a cautious stance, keeping interest rates unchanged for the seventh consecutive time. With the next RBI policy review scheduled for June 5-7, analysts suggest that based on current growth-inflation dynamics, the likelihood of a change in monetary policy stance in June appears minimal.

Analysis of Wholesale Inflation Trends

• Consistent Increase in WPI

April witnessed the sixth successive month that the wholesale price index (WPI) increased on a year-on-year basis, after seven months of deflation. On a month-on-month basis, the WPI was up 0.8%.

• Sectoral Analysis

Primary Articles and Food: Prices rose nearly 2% in April.
Manufactured Products: Saw a rise of 0.5%.

• Historical Context

WPI-based inflation has been rising for two months in a row, with 0.20% in February and 0.53% in March, compared to 0.79% in April last year.

Specifics on Food Inflation

Inflation in food articles rose to 7.74% in April, up from 6.88% in March. Vegetable inflation stood at 23.60%, while inflation in potatoes and onions jumped to 71.97% and 59.75% respectively.

Industry Insights

Sanjeev Agrawal, President of PHD Chamber of Commerce and Industry, noted that inflation in food articles is expected to rationalize by September/ October 2024 as Kharif crops enter the market.

Contrasting Data: Wholesale vs. Retail Inflation

The rise in April’s WPI contrasts with retail inflation data, which eased to an 11-month low of 4.83%. The RBI, primarily considering retail inflation while framing monetary policy, kept interest rates unchanged for the seventh consecutive time, remaining vigilant toward upside risks to food inflation.

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