Inflation in India’s wholesale prices accelerated to a four-month high of 14.55 percent in March, up from 13.11 percent in February, owing to rising prices across all categories of products, with fuel and power, as well as primary articles, accounting for the majority of the rises.
The wholesale inflation has now surpassed 10% for the 12th month in a row. Inflation in fuel and power increased to 34.5 percent in March, up from 31.5 percent in February, while inflation in primary goods increased to 15.54 percent from 13.39 percent.
The gasoline and electricity index increased 5.68 percent month over month, more than double the 2.7 percent increase in February. According to Morgan Stanley economists Upasana Chachra and Bani Gambhir, the steep jump in fuel and power inflation was mostly caused by an increase in electricity rates.
Wholesale price inflation had reached a new high
Wholesale price inflation had reached a new high of 14.9 percent in November 2021, and was at 14.3 percent in December, up from 7.89 percent in March 2021. In January and February, it fell below the 14 percent barrier.
While retail inflation rose to a 17-month high of 6.95 percent in March, owing mostly to higher food costs, the wholesale food price index increased marginally to 8.71 percent in March, up from 8.47 percent in February.
Ms. Chachra and Ms. Gambhir explained that this was due to a faster rise in the pricing of processed food goods while primary food prices remained unchanged.
The Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade, said in a statement that the high inflation in March was due “primarily to rises in prices of crude petroleum and natural gas, mineral oils, basic metals, and other basic commodities as a result of disruption in the global supply chain caused by the Russia-Ukraine conflict.”
ICRA chief economist Aditi Nayar described the broad-based increase in wholesale inflation as “greater than predicted,” saying that the hike in crude oil prices was the biggest contributor to the increase in inflation in March compared to February, followed by fuels and core goods.
“We predict wholesale price index (WPI) inflation to remain in the range of 13.5 percent to 15 percent in April,” she said, “partly depending on where crude oil prices settle in the rest of April 2022 and how much gasoline and diesel prices are lowered further.”
Even core inflation, which includes volatile energy and food costs, increased by 2.2 percent in March 2022 compared to February 2022, to 10.9 percent. “Only four of the core index’s 21 sub-groups, notably beverages, other transportation equipment, wearing clothes, and pharmaceutical products, escaped a month-on-month rise in March 2022,” Ms. Nayar noted.
Inflation in manufactured goods increased from 9.84 percent to 10.71 percent. The change in the index for manufactured products, on the other hand, was much sharper, at 2.31 percent month over month.
While this is a result of producers passing on higher input costs to consumers, Acuité Ratings and Research expects this trend to continue as both consumer demand and producer profit margins remain under pressure, and supply-side bottlenecks, as well as high commodity prices, are expected to persist.
“The inflation levels would have been slightly higher if there had not been a sequential moderation in the wholesale food category, which may start to reverse over the next few months,” said Suman Chowdhury, the firm’s chief analytical officer, emphasizing that the WPI numbers confirm the presence of strong price pressures across the manufacturing and services sectors.