India's wholesale inflation quickens to 3-1/2-year high of 8.3% as energy costs soar
- Higher gasoline and diesel costs typically push up prices across the economy
NEW DELHI: India’s wholesale price inflation rose unexpectedly to 8.3% in April, the fastest pace in three-and-a-half years, government data showed on Thursday, in the first signs of the Middle East conflict’s impact on Asia’s third-largest economy.
The print, driven by the energy shock due to the weeks-long Iran war, could mount pressure on New Delhi to raise retail fuel prices that have been kept unchanged despite the global crude and gas surge since the war started.
While Prime Minister Narendra Modi has asked citizens to curtail imports and fuel usage, government and central bank officials have hinted that a fuel price rise may be inevitable if crude remains elevated.
Higher gasoline and diesel costs typically push up prices across the economy.
April’s wholesale inflation print was sharply higher than the 3.88% rise in March and economists’ projection of 4.4%, according to a Reuters poll.
India central bank governor says may need to act if inflation pressures deepen
While wholesale inflation is not a target for the central bank, these prices would get transmitted to retail inflation components with a lag, Madan Sabnavis, chief economist at Bank of Baroda, said.
“Therefore, these numbers remain important for policy formulation,” Sabnavis added.
The Reserve Bank of India had kept interest rates steady last month, but economists say a sustained rise in fuel and food costs could tilt the scales towards rate hikes later in the year.
India’s retail inflation rose by 3.48% in April. The central bank targets retail inflation at 4%, within a tolerance band of 2% to 6%.
Wholesale fuel and power prices jumped 24.71% year-on-year in April, against a rise of 1.05% in March, data showed.
Petroleum and natural gas prices rose 67.2% in April.
Wholesale food prices rose 2.31% year-on-year after advancing 1.85% in March, while prices of manufactured products advanced 4.62% against a 3.39% rise in the previous month.
Wholesale oilseeds prices rose 12.2%.
Comments