Wholesale inflation rises to 11-year high
April is the fourth straight month of uptick seen in the Wpi-based inflation
NEW DELHI: The wholesale price-based inflation shot up to an all-time high of 10.49% in April, on rising prices of food items, crude oil and manufactured goods, and experts believe that the uptrend is likely to continue.
This is the fourth straight month of uptick seen in the wholesale price index (Wpi)-based inflation. In March, 2021, it was 7.39%.
The low base in April last year, when WPI inflation was (-) 1.57%, also contributed to the spike in April 2021.
“The annual rate of inflation in April 2021, is high primarily because of rise in prices of crude petroleum, mineral oils viz petrol, diesel etc, and manufactured products as compared to the corresponding month of the previous year,” the Ministry of Commerce and Industry said.
Inflation in food articles in April was 4.92% as prices of protein-rich items like egg, meat and fish hardened. Inflation in this basket was 3.24% in March.
This was led by 10.88% inflation in ‘egg, meat and fish’ basket during April, 10.74% in pulses and 27.43% in fruits.
In vegetables, the rate of price rise was (-) 9.03%, against (-) 5.19% in the previous month.
Inflation in the fuel and power basket was 20.94% in April, while in manufactured products it was 9.01%.
ICRA chief economist Aditi Nayar said at 4.9% inflation in food articles was at a six-month high and data shows a greater impact of supply chain disruptions at the wholesale level.
“We expect the headline WPI inflation to rise further to 13-13.5% in the current month before commencing a downtrend, whereas the core-wpi inflation may continue to rise over the next three prints to a peak of around 10.5%.
“The likely trajectory of the WPI inflation supports our view that there is no space for rate cuts to support the faltering growth momentum, even as we expect the monetary stance to remain accommodative,” Nayar added.
India Ratings and Research principal economist Sunil Kumar Sinha said the impetus to April 2021 inflation came from all the three major groups namely primary article, fuel and power and manufactured products which recorded an inflation of 10.2%, 20.9% and 9% respectively in April 2021.
“Within food components except cereals many major items such as pulses, fruits, eggs, meat, tea etc recorded double digit inflation. In April 2021 core inflation rose to 8.3%. Even inflation ex-fruit and vegetables rose to 10.7% in April indicating that the upsurge in wholesale inflation is not only due to seasonal factors,” Sinha added.
He further said that commodities such as minerals, edible oil, crude oil, coal, fertilisers, plastic, basic metals, electrical/ electronic items, auto and auto components etc collectively have a weight of about 44% in the WPI. Since the global prices of these items are mostly a pass through into domestic prices, a surge in global commodity prices have put significant pressure on the headline wholesale inflation.
Nayar said: “There is a growing divergence in terms of the global optimism related to the vaccine rollout, which is pushing up commodity prices, vs. the weaker domestic sentiment engendered by the continuing impact of the second wave of Covid-19 infections in India”.
Data released last week showed retail inflation, measured by the Consumer Price Index, eased to 4.29% in April.
Reserve Bank of India governor Shaktikanta Das had earlier said that manufacturing and services PMIS along with rising WPI inflation show a persistence of input price pressure.