The headline consumer inflation shattered decade-old record for the fourth straight month as April 2023 returned 36.4 percent year-on-year increase. It was long seen coming as the wholesale prices started to raise the head late last year. The transmission from WPI to CPI took its sweet time, and picked up pace as major crop prices rose like never before. This time around too, the WPI has once again stayed north of 30 percent for three straight months – and that will certainly show in CPI numbers in the months to come.
While the WPI increase may have slowed month-on-month, the composition shows that the transmission to retail prices will happen with possibly a greater lag than the ongoing wave. Retail transmission of wheat, flour, rice, milk and poultry prices – all at historic high levels – is almost immediate. There is another three months at least, before the high base effect kicks in. Expect all major locally produced agricultural commodities to stay stubbornly high for the rest of the fiscal year.
Non-agri non-food wholesale prices have been on a consistent rise and that somewhat already shows in record high core inflation numbers. The trend in transportable goods’ prices is once again showing another round of retail price hike is around the corner. As motor spirit and diesel prices at the pump stay elevated. The blip in global crude oil prices in all likelihood will prove temporary and there are little to no chances of retail gasoline prices being slashed anytime soon, as taxes will stay at ceiling for the foreseeable future.
A dip in furnace oil prices has led to a significant slowdown in the sub-index, but that is unlikely to have an impact on retail prices, as furnace oil usage has come to a virtual halt across industries. Transportation cost increases have historically taken two to three months to trickle down at the retail level, as transportable goods ranging from food to chemicals and fertilizers to medicines have shown a record increase. A substantial increase in heating cost for rural consumers is around the corner as wholesale timber prices have increased considerably over the past two months.
Another sub-index showing signs of heating is the textile and apparels sector. Cotton and silk fabrics have shown an increase of more than 50 percent at wholesale level, whereas readymade garments are nearing 50 percent increase. The transmission to retail level may not always be as fast in case of apparel, but it will happen at some point, and there are early signs of that in the retail prices already. There is certainly lot more to come on this front, more likely towards the end of the fiscal year.
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