WPI inflation at record high of 15.08% in April

NEW DELHI: Wholesale pricebased inflation soared to a record high of 15.08% in April mainly on account of spiralling prices of food, fuel and other commodities, which may prompt the Reserve Bank to hike interest rates in upcoming monetary policy review next month.

The Wholesale Price Index (WPI) at 15.08% is the highest in the new series, the data for which is available since 2012-13. The WPI inflation has remained in double digit for the 13th consecutive month since April last year.

“The high rate of inflation in April 2022 was primarily due to rise in prices of mineral oils, basic metals, crude petroleum & natural gas, food articles, non-food articles, food products and chemicals & chemical products etc as compared to the corresponding month of the previous year,” the commerce and industry ministry said in a statement.

Inflation in food articles was 8.35% as prices of vegetables, wheat, fruits and potato witnessed a sharp spike over the year-ago period.

In the fuel and power basket, inflation was 38.66%, while in manufactured products and oil seeds, it was 10.85% and 16.10%, respectively.

Inflation in crude petroleum and natural gas was 69.07% in April.

Data released last week showed that retail inflation rose to a near eight-year high of 7.79% in April, remaining above the Reserve Bank’s inflation target for the fourth straight month.

To tame stubbornly high inflation, the RBI earlier this month hiked its key interest rate by 0.40% and cash reserve ratio by 0.50% in a surprise move.

ICRA chief economist Aditi Nayar said with some correction in commodity prices as a result of the bleaker demand outlook in China offsetting the depreciation in rupee, the WPI inflation may recede mildly below 15% in May 2022, while remaining uncomfortably elevated. The heat wave led to a spike in prices of perishables such as fruits, vegetables and milk, which along with a spike in tea prices pushed up the primary food inflation. The coreWPI inflation reverted to a fourmonth high of 11.1% in April.

“With the WPI inflation remaining solidly in double-digits, the probability of a repo hike in the June 2022 review of monetary policy has risen further. We expect a 40 basis point hike in June 2022 followed by a 35 basis point rise in August 2022, amidst a terminal rate of 5.5% to be reached by mid-2023,” Nayar said.

“With the source of inflation being global supply issues and not exuberant domestic demand, we maintain our view that over-tightening will douse the fledgling recovery without having a commensurate impact on the origins of inflationary pressures,” she added.