New Delhi, May 17 (Representative) India’s wholesale price index (WPI)-based inflation surged to 15.08% year-on-year (y-o-y) in April, 2022 as against 10.74% in April, 2021, data released by Ministry of Commerce and Industry showed on Tuesday. The annual rate of WPI inflation in March was 14.55%. “The high rate of inflation in April, 2022 was primarily due to rise in prices of mineral oils, basic metals, crude petroleum & natural gas, food articles, non-food articles, food products and chemicals & chemical products etc. as compared to the corresponding month of the previous year,” said the press release on the latest WPI figure. The WPI inflation has remained in the double digits for over a year now. As per the official data, month over month change in WPI index for the month of April, 2022 stood at 2.08% as compared to March, 2022.
While WPI inflation has remained firm, the retail inflation which is factored in by Reserve Bank of India to set the key policy rate has also risen and breached the upper tolerance band (6%) of the central bank. For three months in a row, consumer price index (CPI)-based retail inflation has remained above 6% and in April it reached almost 8-year high of 7.79%. “With the WPI inflation remaining solidly in double-digits, the probability of a repo hike in the June 2022 review of monetary policy has risen further. We expect a 40 bps hike in June 2022 followed by a 35 bps rise in August 2022, amidst a terminal rate of 5.5% to be reached by mid-2023,” ICRA Chief Economist Aditi Nayar said. “With the source of inflation being global supply issues and not exuberant domestic demand, we maintain our view that overtightening will douse the fledgling recovery without having a commensurate impact on the origins of inflationary pressures,” she added.
With price rise emerging as a major challenger for policymakers, the RBI earlier this month hiked repo rate by 40 basis points (bps) and cash reserve ratio by 50 bps to contain inflation. Meanwhile, the latest WPI data showed food articles inflation rose to 8.35% in April as compared to 8.06% in March. Fuel and power inflation stood at 38.66% during this month as a result of the spike in diesel, petrol and LPG prices. Manufactured products inflation rose to 10.85% in April as compared to 10.71% in March. “With some correction in commodity prices as a result of the bleaker demand outlook in China offsetting the depreciation in the INR (Indian Rupee), the WPI inflation may recede mildly below 15% in May 2022, while remaining uncomfortably elevated,” ICRA’s Nayar said. “The heat wave led to a spike in prices of perishables such as fruits, vegetables and milk, which along with a spike in tea prices pushed up the primary food inflation,” she added.