Oil Prices Lift India’s WPI Inflation to 8.3% in April, Raise Pass-Through Risks

India’s wholesale inflation accelerated sharply to 8.3% from 3.88% in March, according to data released by the Ministry of Commerce and Industry. The latest reading marks the highest wholesale inflation level in 42 months and reflects rising pressure from fuels, crude oil and manufactured products.

The sharp increase in WPI inflation comes even as retail inflation remains relatively contained. Consumer Price Index-based inflation stood at 3.48% in April, lower than market expectations and below the Reserve Bank of India’s medium-term target of 4%. The divergence is mainly because the government has so far kept retail fuel prices unchanged. However, pressure to raise pump prices is now building due to mounting losses at oil marketing companies. Several government officials have hinted at an imminent price hike.

Fuel and power inflation emerged as the main driver of the April WPI print. Inflation in the category surged to 24.71% from 1.05% in March. On a month-on-month basis, the fuel and power index rose 18.22%, largely due to higher prices of mineral oils. The index for the segment increased to 181.7 in April from 153.7 in March.

Within the fuel basket, crude petroleum and natural gas inflation rose to 67.18% year-on-year. Crude petroleum alone recorded inflation of 88.06%, reflecting the impact of higher global oil prices following tensions in West Asia and disruptions to energy supply routes. Petrol inflation stood at 32.40%, while high-speed diesel inflation came in at 25.19%. LPG inflation was recorded at 10.92%.

Manufactured products inflation, which carries the highest weight in the WPI basket, also moved higher to 4.62% from 3.39% in March. The government said 21 out of 22 manufacturing groups recorded a month-on-month increase in prices. Key contributors included basic metals, chemicals and chemical products, textiles, machinery and food products.

Among manufacturing segments, textiles inflation accelerated to 7.30%, chemicals and chemical products inflation rose to 5.09%, and basic metals inflation stood at 7%. The broad-based increase across manufacturing categories indicates that higher energy and commodity costs are feeding into industrial input prices.

Food inflation under WPI remained moderate. Food articles inflation stood at 1.98%, led by higher prices of fruits, vegetables, eggs, meat and fish, and milk. However, some categories remained in deflation. Onion inflation was at -26.45%, potato inflation at -30.04%, and pulses inflation at -4.03%.