Spike in food & fuel prices push WPI inflation to 13-month high in April | Economy & Policy News

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On the other hand, the price rises of fruits (-1.78 per cent) and protein-rich items like eggs and meat (0.88 per cent) and milk (4.3 per cent) provided some relief during the month | File image

India’s wholesale inflation as measured by the Wholesale Price Index (WPI) rose sharply to a 13-month high in April to 1.26 per cent from 0.53 per cent in March. Thus, WPI-based inflation remained in positive territory for the sixth consecutive month, after having been in the deflationary zone for the majority of the previous financial year.

In April last year, the wholesale inflation stood at -0.79 per cent.

The data released by the Ministry of Commerce and Industry on Tuesday showed that the uptick in factory gate inflation during April was driven primarily by the spike in the prices of food articles and fuel, among other things.

Within food articles, pressure on the factory gate prices majorly built up on account of acceleration in the prices of onions (59.7 per cent), vegetables (23.6 per cent), potatoes (71.9 per cent), and paddy (12.03 per cent). Meanwhile, the prices of cereals (8.7 per cent) and pulses (16.6 per cent) decelerated during the month but remained elevated.

On the other hand, the price rises of fruits (-1.78 per cent) and protein-rich items like eggs and meat (0.88 per cent) and milk (4.3 per cent) provided some relief during the month.

The prices of manufactured products, which have a weighting of 64.2 per cent in the index, remained in deflation (-0.42 per cent) for the fourteenth consecutive month in April, led by a continuing contraction in the prices of textiles (-1.24 per cent), paper (-6.93 per cent), chemicals (-3.61 per cent), and metals (-3.65 per cent) among others. The prices of manufactured food products (1.25 per cent), though, accelerated during the month.

The factory gate prices for fuel and power (1.38 per cent) entered positive territory after 11 months in April, as the prices of high-speed diesel, cooking gas, and petrol accelerated during the month, even as they remained in contraction.

Rajani Sinha, Chief Economist at CARE Ratings, says that although the outlook for food inflation has brightened due to anticipations of a normal monsoon, which is expected to bolster agricultural production, monitoring the monsoon’s temporal and spatial distribution remains critical.

“Brent crude oil prices increased in April due to supply chain disruptions in the Middle East amid geopolitical conflicts. While Brent crude prices have moderated in the past couple of weeks, the recent uptick in global commodity prices, especially industrial metal prices, warrants close monitoring as it can result in higher input costs. Going ahead, the base effect will remain adverse over the next two months, thereby resulting in higher WPI inflation. External risks emerging from ongoing geopolitical tensions also need to be monitored, given the risk they pose to supply chains,” she added.

This uptick in factory gate inflation comes a day after the spike in food prices led only to a marginal decline in retail inflation to 4.83 per cent in April from 4.85 per cent in March, even though core and fuel inflation softened.

Although the Reserve Bank of India (RBI) tracks retail inflation for its monetary policy, the anticipated elevation in WPI may end up keeping retail inflation sticky.

First Published: May 14 2024 | 3:16 PM IST

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