ICRA forecasts average WPI for current fiscal at 3.3%
New Delhi: The wholesale inflation rose to a 13-month high of 1.26 per cent in April fuelled by rising prices of food articles, especially vegetables, amid expectations of RBI holding interest rates in the policy review next month.
The wholesale price index (WPI) based inflation has been rising for two months in a row. It was 0.20 per cent in February and 0.53 per cent in March. WPI inflation was 0.79 per cent in April last year.
The April WPI print is at a 13-month high. The last high was seen in March 2023, when inflation was 1.41 per cent.
“Positive rate of inflation in April 2024 is primarily due to increase in prices of food articles, electricity, crude petroleum and natural gas, manufacture of food products, other manufacturing etc,” Ministry of Commerce & Industry said in a statement on Tuesday.
As per the data, inflation in food articles rose to 7.74 per cent in April as against 6.88 per cent in March. In the fuel and power basket, inflation stood at 1.38 per cent in April, up from (-)0.77 per cent in the previous month.
ICRA Chief Economist Aditi Nayar said WPI inflation is heavily sensitive to global commodity prices which is undergoing upturn year after year.
“A lot of commodity prices have shown an uptrend in last few months, including the crude oil prices that we saw in April. As of now what we have seen in commodity prices, I would expect the WPI to move up further and cross 2 per cent in the next two months of May and June,” Nayar said.
ICRA forecasts average WPI for current fiscal at 3.3 per cent.
In the food articles basket, vegetables inflation was 23.60 per cent in April, up from 19.52 per cent in the previous month.
Inflation in potato jumped to 71.97 per cent in April from 52.96 per cent in March. In onion, it was 59.75 per cent in April, versus 56.99 per cent in the previous month.
PHD Chamber of Commerce and Industry President Sanjeev Agrawal said “going ahead, inflation in food articles is expected to rationalize by September/October 2024 as many of the kharif crops will be entering the mandis and supplementing the existing supply”.
As per the data, manufactured products witnessed deflation of 0.42 per cent in April, as against deflation of 0.85 per cent in March.
The rise in April WPI is in contrast to the retail inflation data for the month. RBI mainly takes into account retail inflation while framing monetary policy.
Retail inflation eased to 11-month low of 4.83 per cent in April.
RBI last month kept interest rate unchanged for seventh time in a row and said that it remains vigilant towards upside risks to food inflation.
The next meeting of the interest rate setting panel of RBI is scheduled for June 5-7.
Nayar said based on the current growth-inflation dynamics, the chance of change in monetary policy stance in June looks extremely dim.
“We are still waiting for the fourth (January-March) quarter GDP growth estimate which is scheduled to come this month end. Also, how the monsoon kicks off will be part of MPC’s tone. Interest rate cut is likely only in second half of the fiscal, maybe in October-December ,” Nayar said.
