Limited Period Offer:Be a PRO for 1 month @Rs49/-Multiple payment options available. Know More

March wholesale inflation reaches 7.3% as high fuel costs hurt

Fuel inflation jumped by 10.2 percent jump in March, after rising just 0.6 percent in February. Further pushed up by a 7.3 percent rise in manufacturing prices and a continuing uptick in food prices, wholesale inflation reached near-record levels in March.

April 15, 2021 / 02:04 PM IST
Representative image

Representative image

A sudden rise in cost of fuel, including petrol, LPG and high speed diesel percolated down into the economy in March as wholesale inflation in the country reached a massive 7.3 percent.

Measured by the Wholesale Price Index (WPI), wholesale inflation had been 4.17 per cent in the previous month of February. While it has been on a continuous uptick from December onwards when it was just 1.9 percent, the latest rise shows broad based price rise shot up in March.

Economists blame a sudden 10.2 percent jump in fuel inflation as the main reason for this. According to the WPI, after reducing for 11 straight months, overall fuel prices had risen by just 0.6 percent in February. Case in point, petrol prices rose by 18.4 percent in March, compared to just 0.8 percent in February. LPG prices soared to 10.5 percent in the latest month, up from just 0.5 percent in February.

"Given the low base of March 2020, the inflation for crude petroleum and natural gas soared to 32.1 percent in March 2021. While crude oil prices have retreated from the peaks seen in March 2021, a falling base is expected to push up the inflation for this segment as well as mineral oils further in April 2021. Moreover, the depreciation in the INR will push up the landed cost of imports, adding to the inflationary pressures for the WPI going forward," Aditi Nayar, Chief Economist at ICRA, said.

Across the board rise

Close

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

A continuing uptick in food inflation also contributed to the pace of inflation accelerating for the third-month in a row. Also, prices of manufactured products, which have a combined weight of 65 per cent in the index, rose by a sharp 7.3 percent.

"Led by pulses, fruits and mutton prices, food inflation jumped to five months high of 5.3 percent. Sharp increase in manufactured product prices, core inflation increased to its highest level in 2011-12 base series at 7.0 percent in March 2021," Devendra Pant, chief economist at India Research and Ratings, said.

The Indian economy was slowly recovering in the fourth quarter of FY21 before the onset of second wave of COVID-19 infections. While the economic recovery in the fourth quarter is unlikely to be much different from that in the third quarter of FY21, wholesale inflation in the fourth quarter has increased to 4.7 percent from 1.9 percent in the previous quarter, Pant added. This implies a higher nominal GVA/GDP growth in the fourth quarter, he said.

Even as wage growth has remined subdued, India Ratings feels that it is likely that listed companies will have another quarter of good EBIDTA growth.

Retail inflation figures for March, released earlier this week showed the Consumer Price Index-based inflation (CPI) at 5.52 percent, rising from February's 5.03 percent. Retail inflation has now stayed within the Reserve Bank of India's (RBI) medium term inflation target of 4(+/-2 per cent) for the fourth consecutive month.

WPI had less than 1/3rd weightage in the inflation target given to RBI, with the rest being CPI. As a result, the latest wholesale inflation figures are not expected to impact interest rates to a major extent.

ICRA expects WPI inflation to rise further over the next two months, peaking at around 11-11.5 percent and 8-8.5 percent, respectively in May 2021.
Subhayan Chakraborty
first published: Apr 15, 2021 12:41 pm

stay updated

Get Daily News on your Browser
Sections