India's wholesale inflation spikes to 42-month high
What's the story
India's wholesale inflation has spiked sharply to a 42-month high of 8.3% in April, significantly outstripping March's 3.88% and the 5.5% estimate. The spike was fueled by a broad-based rise in costs across fuel, power, primary articles, and manufactured goods, signaling intensifying price pressures throughout the economy. The spike comes despite the government's efforts to keep retail prices of petrol, diesel and domestic cooking gas stable amid rising global crude oil prices.
Energy impact
LPG, petrol and diesel prices saw steep rise
Within the fuel and power basket, price pressures intensified sharply across key energy products in April. LPG inflation surged to 10.92% from a contraction of 1.54% in March, while petrol inflation jumped to 32.4% from 2.5% a month earlier. High-speed diesel also saw a steep rise in its inflation rate, which accelerated to 25.19% from March's figure of just 3.26%.
Production costs
Inflation for manufactured products also rose sharply
The rise in energy costs has also affected factory gate prices. Inflation for manufactured products rose to 4.62% in April from March's figure of 3.39%. This was mainly led by chemicals, textiles, machinery and basic metals. Basic metals saw an increase in their inflation rate to seven percent while chemicals and chemical products saw a rise in theirs too at 5%.
Food inflation
Wholesale food prices remained relatively stable
Despite the increase in energy costs, wholesale food prices have remained relatively stable. The WPI food index rose 2.31% year-on-year in April compared to March's figure of 1.85%. Vegetable inflation stood at 0.53%, while onion prices continued to fall sharply by 26.45% year-on-year. However, some items like fruits, eggs, meat and fish continued to rise indicating uneven pressure on food prices within this basket category.
Economic outlook
RBI warned of external shocks worsening the situation
At its April Monetary Policy Committee meeting, the Reserve Bank of India (RBI) warned that while India's macroeconomic fundamentals remain strong, external shocks could worsen if global tensions persist or escalate. "The fundamentals of the Indian economy are on a stronger footing," said RBI Governor Sanjay Malhotra. He added that "the economy is confronted with a supply shock," and it is prudent to wait and watch changing circumstances and evolving growth-inflation outlook.