Wholesale Inflation Hits 13-Month High: Food and Fuel Surge

In April, wholesale inflation in India soared to a 13-month high of 1.26%, up from 0.53% in March. This surge was primarily fueled by rising prices of food articles, particularly vegetables, and a year-on-year increase of 1.4% in fuel and power costs after months of deflation.

Drivers of Inflation: Food and Fuel

Food articles experienced a notable increase, with vegetables leading the surge at 23.6%, followed by a substantial rise in prices of potatoes and onions, jumping 72% and 60% respectively. Inflation in the fuel and power basket also saw a significant uptick, reaching 1.38% in April from the previous month’s (-)0.77%.

Outlook and Forecasts

Experts anticipate continued inflationary pressures due to factors like the base effect and geopolitical tensions. ICRA forecasts the average Wholesale Price Index (WPI) for the current fiscal year to stand at 3.3%, with expectations of further increases in the coming months, possibly exceeding 2% by May and June.

Impact on Policy and Economy

While the rise in wholesale inflation contrasts with the retail inflation data, which eased to an 11-month low of 4.83% in April, the Reserve Bank of India (RBI) has maintained a cautious stance, keeping interest rates unchanged for the seventh consecutive time. With the next RBI policy review scheduled for June 5-7, analysts suggest that based on current growth-inflation dynamics, the likelihood of a change in monetary policy stance in June appears minimal.