Wholesale inflation surges to 42-month high of 8.3% in April on crude spike

New Delhi: India’s wholesale inflation surged to a 42-month high of 8.3% in April from 3.88% in March, driven by a sharp rise in fuel, crude petroleum and manufactured product prices.

Fuel and power inflation jumped to 24.71% in April from 1.05% in March, emerging as the biggest contributor to headline wholesale inflation, according to data released by the department for promotion of industry and internal trade (DPIIT) on Thursday.

Crude petroleum & natural gas prices rose 16.42% sequentially. Inflation in the category surged to 67.18% year-on-year in April, with crude petroleum inflation alone rsising to 88.06%.

Gaura Sen Gupta, chief economist at IDFC First Bank, said the sharp pick-up in WPI inflation is primarily being driven by the fuel component, reflecting the impact of rising global energy prices. “If we look at the breakdown, the consolidated fuel index has surged by around 31% in April after a 6% rise in March.”

This suggests rising prices in segments such as steel, basic chemicals and minerals, mirroring the upward trend in global commodity prices. “The increase in core WPI indicates that input cost pressures on producers are intensifying. The industrial raw materials index, derived from WPI and comprising fuel, metals, minerals and electricity, has jumped 17.8% after rising 3.6% previously.”

This points to a growing squeeze on producer margins, which is likely to become visible in corporate earnings during the first quarter, said Sen Gupta.

According to the commerce and industry ministry, the high rate of inflation in April was “primarily due to increase in prices of mineral oils, crude petroleum & natural gas, basic metals, other manufacturing and non-food articles.”

Data also showed rising pressure in transport fuel prices. Petrol inflation accelerated to 32.40% in April, while high-speed diesel inflation rose to 25.19%.

"WPI inflation will continue to be elevated in the coming month unless there is significant correction in international prices of crude oil," said Madan Sabnavis, chief economist, Bank of Baroda.

“Last year, inflation was negative and hence on this base, higher numbers were anyway expected. While WPI inflation is not a target for MPC (monetary policy committee), it is known that with a lag, these prices also get transmitted to the CPI (consumer price index) component through higher input costs. Therefore, these numbers remain important for policy formulation. They also indicate the pressure that is being exerted on the government to raise prices at the retail end.”

Primary articles inflation rose to 9.17% in April from 6.36% in March. Prices of food articles increased 1.41% month-on-month.

The WPI food index increased to 2.31% in April from 1.85% in March.

Among food items, vegetables inflation stood at 0.53% year-on-year in April, while onion prices remained in deflationary territory (-26.45%). Potato inflation also stayed negative (-30.04%). Inflation in eggs, meat and fish was recorded at 6.68%, while milk inflation stood at 2.56%.

Manufactured products inflation also climbed to 4.62% in April, up from 3.39% in March, indicating broader transmission of higher input costs into factory-gate prices.

Of 22 manufacturing groups, 21 recorded price increases during the month. Key sectors witnessing increases included basic metals, chemicals and chemical products, textiles, food products, and machinery and equipment.