WPI inflation spikes to 4-month high in March
NEW DELHI: The wholesale price index (WPI)-based inflation spiked to a four-month high of 14.55% in March on rising prices of crude oil and other commodities because of the disruption in global supply chain that has come as a fallout of the RussiaUkraine war. This may prompt the Reserve Bank of India (RBI) to raise interest rates to contain price rise.
In February, WPI Inflation was 13.11%, while in March last year, it was 7.89%. WPI inflation has remained in double digits for the 12th consecutive month since April 2021. In November 2021, it had touched a high of 14.87%.
The data released by the commerce and industry ministry on Monday showed that Crude oil prices were the biggest contributor to the rise in WPI inflation in March 2022, relative to February. Food articles witnessed some softening month-onmonth led by vegetables and pulses, though wheat, paddy, potato, milk, egg, meat, and fish saw moderate increases during March. Inflation in food articles eased to 8.06% in March, from 8.19% in February. Vegetable inflation was 19.88% in March, against 26.93% in February.
“The high rate of inflation in March, 2022 is primarily because of the rise in prices of crude petroleum and natural gas, mineral oils, and basic metals because of the disruption in the global supply chain caused by the Russia-Ukraine conflict,” the ministry said.
Inflation in manufactured items was 10.71% in March, against 9.84% in February.
In the fuel and power basket, the rate of price rise was 34.52% in March. In February it was 31.50%.
Oil companies had begun to pass on the high import cost of global crude oil prices by hiking domestic petrol and diesel prices from 22 March, ending a fourand-half-month hiatus. Liquified petroleum gas or cooking gas prices were also hiked during the month.
India is dependent on imports to meet 85% of its oil needs and so retail rates adjust according to global movement. Crude oil prices had mostly been on rise in March, after the Russia-Ukraine conflict started on 24 February.
ICRA chief economist Aditi Nayar said even a normal monsoon may not be enough to douse retail prices of items pushing up food inflation, such as edible oils. ICRA expects the WPI inflation to remain 13.5-15% in the current month, partly depending on where crude oil prices settle in the rest of April 2022 and how much petrol and diesel prices are revised further.
“The broad-based nature of the rise in WPI inflation is likely to be of particular concern to the Monetary Policy Committee. We see a growing probability of the first repo hike being preponed to June 2022,” Nayar said.