March wholesale inflation up to 8-year high of 7.39%

The wholesale inflation rate rose to a more than eight-year high of 7.39% in March, official data released on Thursday showed, on the back of increased prices of crude oil, petroleum goods and basic metals. A low base effect also contributed to the spike – wholesale inflation was 0.42% in March last year. This is the highest level since 7.4% in October 2012.

“We expect WPI inflation to continue to rise for a few more months, possibly reaching double digits in May, the first time since September 2011,” said Rahul Bajoria, chief economist, Barclays India.

Inflation as measured by the Wholesale Price Index was 4.17% in February and 2.51% in January.

The higher wholesale inflation is expected to cause a rise in retail inflation as well, dampening prospects of any rate cut soon. Consumer inflation had risen to 5.5% in March from 5% in the month before. This is near the top of the Reserve Bank of India’s 2-6% target inflation rate band.

“There is negligible space for rate cuts to support growth, in spite of the growing uncertainty related to the surge in Covid-19 cases, localised restrictions and emerging concerns regarding migrants returning to the hinterland,” said Aditi Nayar, chief economist,

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