As Crude and Commodity Prices Rise, WPI Inflation Reaches a Four-month High of 14.55% in March

In March, wholesale price-based inflation reached a four-month high of 14.55% due to rising crude oil and other commodity prices caused by a disruption in the global supply chain as a result of the Russia-Ukraine war. WPI inflation was 13.11% in the month of February as compared to 7.89% in March.

The WPI inflation rate has remained in double digits for 12 months sequentially since April 2021. It reached 14.87% in the month of November.

Despite modest increases in wheat, paddy, potato, meat, milk, egg, and the fish basket during March, some of the food articles witnessed month-on-month exfoliation, led by vegetables and pulses.

During the month of March, the WPI inflation prices in food articles fell to 8.06% from 8.19% in February. In the same month, vegetable inflation was 19.88% as compared to 26.93% in February.

According to a statement from the Commerce and Industry Ministry,” 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 the global supply chain caused by the Russia-Ukraine conflict.”

From March 22, oil companies began to pass the high import cost of global crude oil prices by raising domestic petrol and diesel prices, bringing a four-and-a-half-month hiatus to an end.  Furthermore, domestic cooking gas (LPG) prices were increased during the month.

Crude oil prices were mostly on the rise in March, following Russia’s invasion of Ukraine on February 24.

To support growth, the Reserve Bank kept its key repo rate- at which it lends short-term money to banks- unchanged at 4 percent for the 11^th consecutive time earlier this month. Also, The RBI increased its retail inflation project for the current fiscal year to 5.7%, up from 4.5% previously.

Following the ongoing Russia-Ukraine conflict, RBI Governor Shaktikanta Das stated that the prices of crude oil and edible oil will likely remain uplifted.