WPI Inflation Rise In Double Digit To Touch 11-Year High In April. Know The Reason Behind This Record Jump

While food inflation rising by 4.92 per cent, inflation for fuel and manufacturing items also soared to 20.94 per cent and 9.01 per cent, respectively.

New Delhi: It is now evident that common man is reeling under the effect of Covid-19 and inflation as the wholesale inflation moved into double digits in April for the first time in 11 years. As per the data released by the commerce ministry, Wholesale Price Index (WPI) based inflation quickened to 10.49 per cent in April from a contraction of 1.7 per cent in the year-ago period.

While food inflation rising by 4.92 per cent, inflation for fuel and manufacturing items also soared to 20.94 per cent and 9.01 per cent, respectively. Core inflation, excluding food and fuel prices, shot up to a record 8.4 per cent in April. Also Read: Adar Poonawalla Exits Panacea Biotec; Offloads Entire Stake For Rs 118 crore

What’s the reason behind this double digit rise?

The wholesale inflation zoomed to its peak because of higher oil and commodity prices and a low base effect, leaving the central bank with little scope to cut interest rates to aid faltering growth.

The low base of April last year, when WPI inflation was (-) 1.57 per cent, also led to the rise in April 2021. WPI inflation was 7.39 per cent in March 2021. Moreover, the rise in prices of commodities such as minerals, edible oil, crude oil, coal, fertilisers, plastic, basic metals, electrical/electronic items, auto and auto components — which has a major impact of about 44 per cent in the WPI — also contributed to the double digit rise in inflation.

On the contrary retail inflation eased to a three-month low of 4.29 per cent in April, data released last week showed. However, retail inflation may also see upward pressure with rising input cost and supply-side disruptions.

Experts believe that penetration of the virus in the rural areas may disrupt supply chain at the primary mandi level and further dampen the multiplier impact of a good harvest this year as normal monsoon is forecasted, raising concerns of high food inflation.

“Unlike last year when producers benefited from reducing input cost pressures, this year they are likely to witness margin pressure with higher commodity cost. The sharp rise in core WPI inflation indicates a rise in cost-push pressures from wholesale prices to retail prices," IDFC Bank said in a research note on Monday.

Meanwhile, the rise in WPI climbing to an 11-year high of 10.49 per cent in April is a "major upside surprise", and it is the first time WPI has been in double digits in almost a decade, Barclays said in a report titled, 'April WPI: Surging ahead' has said.

The banking, technology and shared services company has said perishable food products -- especially vegetables and fruits -- minerals and basic metals drove the inflation surge in April, which may "precede an increase in the CPI in the coming weeks".

Barclays said the WPI inflation could further rise, peaking in May.