BackWholesale price inflation zooms to 8-yr high in March
Fuel prices rose 10.25% during March, while prices of manufactured items increased by 7.34%. Among food items, prices of pulses (13.14%) and fruits (16.33%) rose sharply
PremiumNEW DELHI : Wholesale inflation galloped to the highest in at least eight years in March, with rising fuel prices and higher input costs reinforcing concerns that price rises could aggravate because of supply constraints caused by lockdown-like curbs.
Data released by the industry department showed Wholesale Price Index (WPI)-based inflation soared to 7.39% in March, the highest in the series that started in 2011-12. It was 4.17% in February. During March, fuel prices rose 10.25%, while prices of manufactured items increased by 7.34%. Among food items, prices of pulses (13.1%) and fruits (16.3%) rose sharply.
Core inflation also increased to a series-high 7%, driven by metals, textiles, chemicals and rubber, the global prices of many of which have recorded sharp increases in recent months on the back of optimism generated by the covid vaccine rollout.
India’s retail inflation accelerated to a four-month high at 5.52% in March as food prices quickened, data released by the National Statistical Office showed on Monday. Food inflation rose by 4.94%, driven by protein items such as pulses, meat, fish and egg. Fuel prices increased by 4.5% in March, while services inflation rose by 6.88% during the month.
Devendra Kumar Pant, chief economist at India Ratings ad Research, said while the sharp increase in WPI inflation is mainly due to base effect, the near-term inflation outlook is not rosy. “With summer setting in, perishable products (especially vegetables) may see higher inflation, and the low base of last year will also have an adverse impact on wholesale inflation at least till August," he added.
IHS Markit, in its latest release on Purchasing Managers’ Index (PMI) for the manufacturing sector, also said the upturn in economic activity was stymied by elevated cost pressures, with input cost inflation turning out to be among the strongest seen in the past three years.
Aditi Nayar, chief economist of ICRA Ltd, said she expects the headline and core WPI inflation to rise further over the next two months, peaking at around 11-11.5% and 8-8.5%, respectively, in May.
“The expected trajectory of the WPI inflation, and its partial transmission into the CPI inflation going ahead, supports our view that there is negligible space for rate cuts to support growth, in spite of the growing uncertainty related to the surge in covid-19 cases, localized restrictions and emerging concerns regarding migrants returning to the hinterland," she added.
RBI in its latest monetary policy review has kept policy rates unchanged, sticking to its accommodative stance to focus on economic recovery from the worst recession in at least 40 years in FY21. There is growing concern that the second wave of coronavirus infections could derail the nascent economic recovery.
The monetary policy committee (MPC) last week said the evolving CPI inflation trajectory is likely to be subjected to both upside and downside pressures. “The bumper foodgrain production in 2020-21 should sustain softening of cereal prices going forward. Pump prices of petroleum products have remained high. Reduction of excise duties and cesses and state-level taxes could provide some relief to consumers on top of the recent easing of global crude prices. This could slow down the propagation of second-round effects. The impact of high international commodity prices and increased logistics costs are being felt across manufacturing and services," the MPC added.
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