Wholesale inflation surged to a 13-month high of 1.26% in April, driven by escalating prices of food items, particularly vegetables. This spike in the wholesale price index (WPI) inflation marks a consecutive two-month increase, following a rise from 0.20% in February to 0.53% in March. Compared to April last year, when WPI inflation stood at 0.79%, the current figure indicates a notable escalation.
Attributing the rise to various factors, including "increase in prices of food articles, electricity, crude petroleum and natural gas, manufacture of food products, other manufacturing etc," the Ministry of Commerce & Industry highlighted the significant role of global commodity prices.
Aditi Nayar, Chief Economist at ICRA, emphasized the sensitivity of WPI inflation to global commodity trends, noting an upward trajectory in recent months. "A lot of commodity prices have shown an uptrend in the last few months, including the crude oil prices that we saw in April," Nayar stated.
With projections foreseeing a further uptick, Nayar anticipated the WPI to surpass 2% over the next two months, with ICRA forecasting an average WPI for the fiscal year at 3.3%. The food articles category witnessed a substantial surge, with vegetable inflation reaching 23.60% in April, up from 19.52% in the previous month. Notably, inflation in potatoes soared to 71.97%, while onion inflation stood at 59.75%.
Sanjeev Agrawal, President of the PHD Chamber of Commerce and Industry, offered a perspective on the future trajectory, suggesting that inflation in food articles is expected to rationalize by September/October 2024 as kharif crops enter the market, bolstering supply.
In contrast, manufactured products experienced a deflation of 0.42% in April, indicating a nuanced economic landscape. While the rise in WPI contrasts with retail inflation data, where a drop to an 11-month low of 4.83% in April was observed, the Reserve Bank of India (RBI) primarily considers retail inflation in its monetary policy decisions.
With the next RBI interest rate-setting panel meeting scheduled for June 5-7, Nayar cautioned against expectations of a policy shift, suggesting that "the chance of change in monetary policy stance in June looks extremely dim." She emphasized the significance of forthcoming economic indicators, including the fourth-quarter GDP estimate and monsoon patterns, in shaping future policy decisions. Nayar speculated that an interest rate cut is more likely in the second half of the fiscal year, possibly in October-December.
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