India's inflation based on the Wholesale Price Index (WPI) rose further to 15.08 percent in April from 14.55 percent in March, according to data released by the commerce ministry on May 17.
The WPI inflation was 10.74 percent a year ago. Another 10 percent-plus print in April means WPI inflation has extended its stay in double-digit territory to 13 months in a row.
The rise in wholesale inflation in April comes after data released on May 12 showed the more closely tracked headline retail inflation rate based on the Consumer Price Index (CPI) jumped to 7.79 percent in April - the highest since May 2014, or 95 months.
Expectations of a sharp increase in inflation in April forced the Reserve Bank of India's (RBI) Monetary Policy Committee to meet more than a month in advance of their scheduled meeting in June and announce a 40-basis-point hike in the repo rate on May 4.
At 15.08 percent, the inflation print for April is the highest in the current series, data for which is available starting April 2013. As such, the latest wholesale inflation number is the highest in at least nine years.
Inflation was driven higher in April because of an across-the-board increase in sequential price pressures. The overall all-commodities index of the WPI rose 2.1 percent month-on-month, while the index for the fuel and power group was 2.8 percent higher in April compared to March.
The index for manufactured products – which account for 64.23 percent of the WPI basket – rose 1.7 percent in April from March.
In what will leave policymakers worried, the food index posted the highest sequential gain in April, rising 3.4 percent month-on-month.
"The heatwave led to a spike in prices of perishables such as fruits, vegetables and milk, which along with a spike in tea prices pushed up the primary food inflation," noted Aditi Nayar, ICRA's chief economist.
In terms of inflation, manufactured products inflation rose to a five-month high of 10.85 percent in April, pushing up core WPI inflation to a four-month high of 11.1 percent, Nayar said.
Core inflation is seen as an indicator of underlying demand and excludes volatile components such as food and fuel.
"With the WPI inflation remaining solidly in double-digits, the probability of a repo hike in the June 2022 review of monetary policy has risen further. We expect a 40-basis-point hike in June 2022 followed by a 35-basis-point rise in August 2022, amidst a terminal rate of 5.5 percent to be reached by mid-2023," Nayar added.
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