Wholesale Inflation Hits 3-Year High of 3.88% in March

India's Wholesale Inflation Hits 38-Month High

India's wholesale inflation rose to a 38-month high of 3.88 percent in March, compared with 2.13 percent in February, driven by a sharp increase in crude petroleum prices, higher fuel costs, and firmer prices of manufactured products, according to government data released on April 14.

The rise in wholesale prices mirrors the trend seen in the retail basket, where consumer inflation also inched up to 3.4 percent in March from 3.21 percent in the previous month, led by higher food and cooking fuel prices. This increase in retail inflation is worth noting, especially considering it remains below the Reserve Bank of India's medium-term target of 4 percent.

The sharpest jump in wholesale inflation came from the crude petroleum and natural gas segment, where inflation surged to 35.98 percent in March from a contraction of 2.56 percent in February. Within this category, crude petroleum inflation alone accelerated to 51.57 percent, compared with a decline of 1.29 percent a month earlier. This significant increase in crude petroleum prices is a key factor contributing to the overall rise in wholesale inflation.

| Segment | February Inflation Rate | March Inflation Rate | Change | | --- | --- | --- | --- | | Crude Petroleum and Natural Gas | -2.56% | 35.98% | 38.54% | | Fuel and Power | -3.78% | 1.05% | 4.83% |

Fuel and power inflation also turned positive at 1.05 percent, reversing a contraction of 3.78 percent in February. Petrol prices rose 2.5 percent, while high-speed diesel inflation climbed to 3.26 percent.

The data suggests that elevated global oil prices are beginning to feed into domestic wholesale prices, raising concerns of broader inflationary pressures if energy prices remain firm. Food inflation in the wholesale basket rose to 3.87 percent in March from 3.47 percent in February.

| Food Item | February Inflation Rate | March Inflation Rate | Change | | --- | --- | --- | --- | | Eggs, Meat, and Fish | 5.36% | 6.63% | 1.27% | | Fruits | 2.11% | 2.11% | 0.00% | | Milk | 2.62% | 2.62% | 0.00% | | Wheat | -2.6% | -4.6% | -2.0% | | Pulses | -2.83% | -5.17% | -2.34% |

However, some categories continued to remain in deflation. Wheat prices contracted 4.6 percent, pulses declined 5.17 percent, while onion and potato prices remained sharply lower on an annual basis, helping moderate overall food inflation.

Inflation in manufactured products, which account for the largest share in the wholesale price index, rose to 3.39 percent in March from 2.92 percent in February. Prices increased across several industrial categories, including textiles, chemicals, leather products, and basic metals, indicating that rising raw material and energy costs may be passing through to factory-gate prices.

The March reading marks the highest wholesale inflation print since early 2023, signalling that cost pressures are beginning to build again after a prolonged period of moderation.