India’s wholesale inflation quickens to 3½-year high of 8.3% as energy costs soar

[NEW DELHI] India’s wholesale price inflation rose unexpectedly to 8.3 per cent in April, the fastest pace in 3½ years, government data showed on Thursday (May 14).

It is the first sign of the Middle East conflict’s impact on Asia’s third-largest economy.

The increase, driven by the energy shock due to the weeks-long Iran war, could mount pressure on New Delhi to raise retail fuel prices – which have been kept unchanged, despite the global crude and natural gas surge since the war started.

While Indian Prime Minister Narendra Modi has asked citizens to curtail imports and fuel usage, government and central bank officials have hinted that a rise in fuel prices might be inevitable if crude remains elevated.

Higher petrol and diesel costs typically push up prices in the economy.

April’s wholesale inflation print was sharply higher than the 3.88 per cent rise in March and economists’ projection of 4.4 per cent, going by a Reuters poll.

Madan Sabnavis, chief economist at Mumbai-based Bank of Baroda, said that while wholesale inflation is not a target for the central bank, these prices would get transmitted to retail inflation components with a lag.

“Therefore, these numbers remain important for policy formulation,” he added.

The Reserve Bank of India had kept interest rates steady in April, ​but economists say a sustained rise in fuel and food costs could tilt the scales towards rate hikes later in the year.

SEE ALSO

India hikes gold and silver tariffs to 15% as it defends rupee against Iran war fallout

Indian banks resume bullion imports after month-long halt over 3% levy, sources say

War turmoil saps Asian reserves with Philippines, India hit most

India clears US$3.9 billion push to turn coal into gas to reduce imported fuel reliance

More

India’s retail inflation rose by 3.48 per cent in April. The central bank targets retail inflation at 4 per cent, within a tolerance band of 2 to 6 per cent.

Wholesale fuel and power prices jumped 24.71 per cent year on year in April, against a rise of 1.05 per cent in March, data showed.

Petroleum and natural gas prices rose 67.2 per cent in April.

Wholesale food prices rose 2.31 per cent year on year after advancing 1.85 per cent in March, while prices of manufactured products advanced 4.62 per cent against a 3.39 per cent rise in the previous month.

Wholesale oilseeds prices rose 12.2 per cent. REUTERS