WPI inflation reaches a record 7.4%

Inflation based on the Wholesale Price Index (WPI) rose to a record 7.4% last month, an increase that is expected to feed into higher retail prices in the near term. Price gains at the wholesale level were driven by a 10.3% increase in fuel and electricity, the fastest pace in two years, and the fastest rise in inflation of manufactured products by 7.3%.

March’s wholesale price inflation is at its highest level since the current wholesale price index (WPI) series, and economists expect the trend to persist for a few more months due to the base effects of last year’s national lockdown and a fresh surge of partial lockdowns Will remain May disrupt the supply chain.

“The annual rate of inflation was 7.39% (provisional) for the month of March 2021,” the Office of the Economic Adviser of the Department of Industry and Internal Trade Promotion said in a release.

However, the rate of inflation for the month (March 2021 over February 2021) remained at 1.57%. The prices of crude oil, petroleum products and basic metals have increased significantly in March 2021 as compared to the same month of the previous year.

A nationwide lockdown in March 2020 also affected WPI index calculations, with inflation of 0.4% that month, the department reported.

Rise in edible oil prices

The WPI food index hardened from 3.31% to 5.28% in February, with manufactured food inflation touching a 9-month high of 49% despite vegetable and grain prices easing. Within manufactured food products, edible oils recorded 34.2% inflation in March.

Among manufactured products, light steel prices recorded 14.5% inflation with an increase in global metal prices, and a decrease in the inflation rate for other basic metals, reaching 17%.

“WPI inflation recorded a broad-based hardening in March 2021 for a series-high 7.4% in February 2021, and printed much higher than our expectation of 6.1% compared to the expected rise in inflation for core items and fuels. , “Aditi Nair, Chief Economist, ICRA Ltd.

‘Eligible policy space’

ICRA expects headline and core WPI inflation to rise to 11.0-11.5% and 8-8.5% in April and May.

Ms. Nair said, “The expected pace of WPI inflation, and its partial transmission into CPI inflation going forward, supports our view that there is negligible room for growth rate cuts.”