Wholesale Price Index Rose to 15.08% in April and Now Stands at 174.9

WPI rose to 15.08%
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The Wholesale Price Index (WPI) rose to 15.08% in April compared to 14.55% in the previous month. The data released by the Ministry of Commerce and Industry reveals that wholesale inflation in April 2022 is the highest since 1991.

The figure registered in April marks the 13th consecutive month of double digit wholesale inflation. The latest WPI numbers run parallel to the rise in retail inflation, which stood at 7.8% in April, making it the highest in about the last 8 years. 

The data released by the commerce ministry shows that fuel and power inflation rose to a whopping 38.66% in April, followed by primary articles and manufactured products at 15.45% and 10.85% respectively. Let us analyze the data in detail.

Insights into Date Released By Commerce Ministry

The wholesale price index is composed of three key indices- primary articles, fuel and power, and manufactured products. The weightage of these components in the overall index is as follows:

Primary Articles22.6%
Fuel & Power13.2%
Manufactures Products64.2%
Total100%

As said, the highest inflation is seen in the Fuel & Power index and the reasons for the same are quite obvious. The Russia-Ukraine conflict took the crude oil prices to their all time high, which directly and indirectly has affected almost every other commodity. The same is being reflected in rising fuel and power prices. The inflation in crude petroleum and natural gas has been at 69.07% in April. It can be said that this also has affected the prices of other categories like primary articles and manufactured products as well. 

Rise in WPI Food Index

The WPI Food Index which has a weightage of 24.38% in the overall WPI has increased from 167.3 in March to 172.9 in April or from 8.71% to 8.88%. The index which consists of food articles from the Primary Articles category and food products from the Manufactured Products category shows how the household budgets have been affected due to the rise in food prices. 

In the press release, the commerce ministry said, “The high rate of inflation in April, 2022 was primarily due to rise in prices of mineral oils, basic metals, crude petroleum & natural gas, food articles, non-food articles, food products and chemicals & chemical products etc. as compared to the corresponding month of the previous year”

Breakdown of Different Categories

Primary Articles

The inflation in the primary articles category has clocked to 15.08% in April 2022. Breaking this down further, we can see that the food articles inflation has risen to 15.45% in April. Inflation in the prices of vegetables has increased to 23.24% on a Y-o-Y basis. This is followed by 19.84% rise in the prices of Potatoes and 10.89% in fruits. Wheat prices also felt the inflationary pressure in which the number for April stands at 10.7%. All these food items are a staple part of most Indian households. The continuous increase in prices in each of these categories has hit hard on the family budget. 

Fuel & Power

The inflation in the Fuel & Power category has been at 38.66% in April. The highest weightage in this category is of high-speed diesel (HSD), in which the inflation also has been the highest at 66.14%. The prices of petrol and LPG haven’t been immune. Inflation in petrol and LPG spiked to 60.63% and 38.48% respectively.

Manufactured Products

As learned, the manufactured products index in April rose to 10.85%. In vegetable and animal oils and fats, the inflation has been at 15.05%. The prices of apparel are also likely to be affected due to 12.98% inflation in manufactured textile products. The construction sector, particularly the real estate segment has still to bear the brunt of inflation which remains unchanged at 5.53% from the previous month. The report released by the commerce ministry also shows a fair increase in inflation in manufactured basic steel products, semi finished steel, and fabricated metal products, all of which are key elements in the construction business. 

Here is a table showing the wholesale index of the last 6 months:

Group/Sub groups/CategoriesNovember 2021December 2021January 2022February 2022March 2022April 2022
Primary Articles168.4168.4167.5167.5 170.3174.9
Food Articles178.3 176.7172.0170.4169.0175.1
Non-food Articles156.5 164.6165.9170.2175.2177.3
Minerals198.6 204.7224.7225.0224.7225.0
Crude Petroleum & Natural gas 115.5 109.3122.3125.1151.6152.5
Fuel & Power136.0 133.8135.3138.3146.9151.0 
Manufactured Products136.6 136.5 137.2138.9141.6144.0

Consequences of the rise in inflation

It can be easily deciphered from the above table that inflation has shadowed over all categories, be it food, edible oils, petroleum products, or construction materials. The consequences of the same are very apparent. 

Decreased household consumption

The most direct hit of the rising inflation are the households who have to bear the increase in prices of vegetables, other food items, manufactured items, edible oils, etc. Either the consumption will decrease or they will switch to less expensive items from the categories. The increase in petrol and diesel prices will also affect daily commuters, mainly those who have their own two or four wheelers.

Increase in interest rate

The RBI had already increased the repo rate by 40 basis points, which has resulted in banks increasing interest rates on different types of credit instruments. Interest rates on home loans, personal loans, and credit cards have already increased by a fair margin. But this is not the end in any sense. Considering this rampant rise in inflation in all categories, the Reserve Bank is likely to increase interest rates further in the coming days. Many suggest that the repo rate may go well above 5% by the time we ingress into 2023. Similarly, the domino will be felt by end consumers like us, resulting in decreased borrowing and spending. 

The positive side, or atleast what we expect from all these is that inflation can be contained and suppressed in the future. However, this will not happen only with tightening of monetary policy by the RBI. The geopolitical situation and global supply chain should also get on to the right track before things start easing out. 

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