Wholesale price inflation spirals to 14.55% in March

The wholesale price-based inflation, based on the Wholesale Price Index (WPI), surged to 14.55% in March. After a record high of 14.87% in November, the WPI, which measures what producers charge retailers, declined for three consecutive months before again rising in March.

The wholesale inflation has remained in double-digits since the start of the financial year 2021-22. The increase follows close on the back of the retail inflation for March which increased to a 17-month high. "The high rate of inflation in March 2022 is primarily due to rise in prices of crude petroleum and natural gas, mineral oils, basic metals, etc owing to disruption in global supply chain caused by Russia-Ukraine conflict," the government press release said.

The core WPI inflation too hardened in March rising 2.2% sequentially amid global supply disruptions caused by the Russia-Ukraine crisis. The full impact of local fuel prices is expected to show in subsequent months. "The core WPI recorded a broad-based and massive 2.2% jump in sequential terms in March 2022, a fallout of the geopolitical tensions, with the inflation rate rising to 10.9%. Only four of the 21 sub-groups of the core index escaped a month-on-month rise in March 2022, namely beverages, other transport equipment, wearing apparel and pharmaceutical products," Aditi Nayar, chief economist, ICRA, said.

In its bi-monthly monetary policy review earlier this month, RBI had kept its key policy rates unchanged for the eleventh time in a row, maintaining its ‘accommodative stance’ to support growth. However, it has indicated a shift to inflation and a gradual withdrawal of its accommodative stance. The RBI has also revised upwards its inflation projection to 5.7% from 4.5% earlier on the back of increasing prices of oil and commodities globally.

Crude petroleum increased by 83.6% in March in comparison to 55.2% in February. Petrol and LPG price-based inflation were higher at 53.4% and 24.9% respectively. Inflation in manufactured products, carrying the biggest weightage of 64.2% in the WPI increased by 10.7%. Within manufactured products, the wholesale prices of basic metals increased by 25.97%, chemicals and chemical products by 12.66%, textiles by 12.64%, paper & paper products increased by 12.24% in Mar'22. Out of the 22 NIC two-digit groups for Manufactured products, 18 groups witnessed an increase in prices while 3 groups witnessed a decrease in prices in March as compared to February.

Wholesale Food Inflation

WPI has a sub-index called Food Index (WFPI), which is a combination of the Food Articles from the Primary Articles basket, and the food products from the Manufactured Products basket. As a sub-index, it broadly constitutes 24.4% of the overall Wholesale Price Index.

The Wholesale Food Price Index increased to 8.71% in Mar'22 from 8.47% in Feb'22. Wholesale prices of vegetables were higher by 19.9%, fruits by 10.6% while the prices of wheat increased by 14%.

Reference Reading

What is wholesale inflation?

Wholesale inflation is based on the Wholesale Price Index (WPI) which measures the changes in the price of 697 goods sold and traded in bulk by wholesale businesses to other businesses. Analysts use the numbers to track the supply and demand dynamics in industry, manufacturing, and construction. An upward surge in the WPI print indicates inflationary pressure in the economy and vice versa. The quantum of rise in the WPI month after month is used to measure the level of wholesale inflation in the economy. The wholesale price basket is broadly grouped into Primary articles, Fuel & Power, and Manufactured Goods.

• Primary articles: It constitutes 22.6% of the overall Wholesale Price Index. It is further subdivided into Food Articles, Non-food articles, Minerals, and Crude Petroleum & Natural Gas
• Fuel & Power: It constitutes 13.2% of the overall Wholesale Price Index and tracks price movements in Petrol, Diesel, and LPG
• Manufactured products: This is the biggest component basket and carries a weightage of 64.2% in the overall WPI. It comprises of a variety of manufactured products such as Textiles, Apparels, Paper, Chemicals, Plastic, Cement, Metals, etc and Manufactured Goods such as Sugar, Tobacco Products, Vegetable and Animal Oils, etc.