E-Paper
Wholesale inflation shoots up to 14.5% on pricier fuels
The latest WPI value, which is the second highest in the current series (since April 2012), comes after retail inflation, as measured by the Consumer Price Index (CPI), surprised analysts to grow at 6.95% in March 2022.
Wholesale inflation rose to 14.5%, its second highest value in at least 10 years, and the highest since November last, driven by fuel prices, and highlighting the tailwinds to inflation.
The latest WPI value, which is the second highest in the current series (since April 2012), comes after retail inflation, as measured by the Consumer Price Index (CPI), surprised analysts to grow at 6.95% in March 2022.
Wholesale prices, as measured by the wholesale price index (WPI), hardened significantly between the months of February and March, according to latest data released by ministry of commerce and industry. At 14.5%, the annual growth in WPI in March was almost 1.5 percentage points higher than the 13.1% WPI number for February.
The highest WPI growth in the current series was recorded in the month of November 2021, when it grew at 14.9%.
With March being the last monthly value for fiscal year 2021-22, annual wholesale inflation in 2021-22 came at 13%, the highest in the current series by a long distance. The second highest WPI growth was in 2012-13, when it grew at 6.9%. Annual growth in CPI in 2021-22 was much lower at 5.5%.
To be sure, the composition of CPI and WPI baskets is very different, both in terms of kind of commodities which are included in it and their weights. When seen against this backdrop, the surge in both CPI and WPI numbers in March suggests that inflationary tailwinds are broad-based in the Indian economy.
Unlike in the case of retail inflation, which was largely driven by a surge in food prices, fuel prices account for more than 25% of the growth in wholesale inflation in March. This reflects an increase in crude oil prices in the month of March. CPI, which tracks retail prices of fuel, actually saw a decline in its fuel sub-component of inflation in March, as the data did not factor in the full impact of hike in prices of petrol and diesel.
To be sure, the food sub-component of WPI increased from 8.47% in February to 8.71% in March . While vegetable price inflation actually saw a moderation between February and March — it came down from 19.7% to 15.5% — wheat price inflation, in keeping with the surge in international prices, has risen sharply to 14% in March.
That WPI growth across the three major sub-categories of primary goods (15.5%), fuel and power (34.5%) and manufactured goods (10.7%) was in double digits shows that price pressures are broad based in the economy. The latest WPI value comes on account of an already high base. WPI growth in the month of March 2021 was 7.9%.
Dr Sunil Kumar Sinha, principal economist, India Ratings, said, “Though the impact of Russia Ukraine conflict has mostly been negative for the global as well as Indian economy, there are some positives as well. Firstly, due to higher inflation the nominal GDP has turned out to be better than expected leading to much higher tax collections than anticipated earlier. Secondly, due to the supply disruption of wheat from Russia and Ukraine, India is now exporting wheat in the global market.”
It is expected to remain at the elevated levels in the near term due to the supply chain disruption caused by export restrictions by Indonesia and the Russia-Ukraine conflict, Dr Sinha added.
