WPI inflation hits high of 10.5%

Inflation as measured by the Wholesale Price Index quickened to a record high of 10.5% in April, from 7.4% in March and 4.8% recorded in February, thanks to a base effect from last April which recorded a negative inflation of 1.57%, and a surge in fuel, food and manufactured goods’ prices.

Wholesale inflation in fuel and power more than doubled to 20.94% in April 2021 from 10.25% in March 2021, while manufactured goods recorded inflation of 9%, prompting industry to urge the government to rationalise fuel prices and try to rein in high commodity prices.

Food prices also hardened to record 7.6% inflation in April from 3.6% in February and 5.3% in March. Retail inflation for April had moderated to a three-month low of 4.29% from over 5.5% in March, helped by cooling food prices, but economists had expected the WPI to harden during the month.

The high inflation in fuel and power is significantly raising input costs of Indian industry, said PHDCCI president Sanjay Aggarwal. “We urge the government to consider petroleum products in the ambit of GST to rationalise the prices and to contain rising inflation,” he said.

ICRA chief economist Aditi Nayar said the headline WPI inflation surge was sharper than expected and could rise further to 13%-13.5% in May before winding down.

However, core WPI inflation may continue to rise over the next three months to a peak of about 10.5% from 8.4% in April. “The likely trajectory of WPI inflation supports our view that there is no space for rate cuts to support the faltering growth momentum, even as we expect the monetary stance to remain accommodative,” she said.

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Printable version | Jun 23, 2021 5:17:36 PM |

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