The wholesale price of items like plastic bags jumped 3.5% from February – the highest sequential rise since October 2021. (Source: Wikimedia Commons)
India’s wholesale inflation in March jumped to the highest in over three years as the West Asia war propelled crude petroleum prices almost 50% higher from February, with prices of common every-day plastic items, such as playing cards and plastic bags, seeing the sharpest sequential rise since the early months of Russia’s invasion of Ukraine in 2022.
According to data released by the commerce ministry on Wednesday, India’s Wholesale Price Index (WPI) inflation rose to a 38-month high of 3.88% in March, up from 2.13% in February, as crude petroleum prices surged 49.1% from February – the highest ever month-on-month increase as per data in the current WPI series going back till 2012. Other petrochemical items which saw the largest-ever month-on-month increase in wholesale prices in March included ammonia gas (up 22.3%) – used to make fertilisers – and Poly Vinyl Chloride, or PVC (up 8.4%). Plastic products like playing cards saw their wholesale price rise by 4.1% – the most in almost four years.
“WPI inflation is a cleaner reflection of global commodity prices and captures the ongoing energy price shock better than CPI,” Barclays economists Aastha Gudwani and Amruta Ghare said. “Of the 174 bps increase in headline WPI inflation, 93 bps was driven by crude petroleum and natural gas, followed by a 63 bps increase led by fuel and power WPI,” they added.
The wholesale inflation data for March comes two days after the statistics ministry released consumer price numbers for last month, which showed headline retail inflation only rose marginally to 3.4% year-on-year from 3.21% in February. However, certain components of the Consumer Price Index (CPI) – such as airfares and LPG cylinders and piped natural gas – showed a sharp up-tick in prices from the previous month.
The war in West Asia has pushed up energy prices globally, with the price of India’s crude oil basket surging more than 60% in March compared to February. And while the government has shielded consumers – the pump price of petrol and diesel has not changed – producers are seeing their costs rise.
According to data released Wednesday, March saw the wholesale price of LPG, petrol, kerosene, Aviation Turbine Fuel, and high-speed diesel rise by 4-8% compared to February. This is one of the largest increases in the wholesale prices of all these five fuels in around four years.
Some of the other energy-related items that witnessed a big jump in wholesale prices in March from February include furnace oil (up 28%) and naphtha (19%). Materials used in packaging, such as corrugated paper board, were 3% more expensive compared to February. Meanwhile, the wholesale price of items like plastic bags jumped 3.5% from February – the highest sequential rise since October 2021.
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Wholesale food prices were largely unchanged in March compared to February, with their inflation rate – or the year-on-year- change – steady at 1.85%.
Economists expect companies to soon start passing on these higher costs to consumers. This will make the Reserve Bank of India’s (RBI) interest rate decisions more difficult, as economic activity is also taking a hit from energy shortages and the consequent price increases as well as the rise in input costs.
The Indian central bank left the policy repo rate unchanged at 5.25% last week, but predicted that headline retail inflation – which it is legally mandated to keep at 4% in the medium term – is set to more than double to 4.6% in 2026-27. Meanwhile, GDP growth is seen declining to 6.9% this year from 7.6% in 2025-26.
“A possible reescalation in West Asia conflict leading to higher price of crude and edible oil, along with currency depreciation will pose the upside risk to inflation. In the medium term, El Nino effect is expected to increase food prices,” Megha Arora, Director-Economics at India Ratings & Research, said, adding that wholesale inflation may rise further to 4.7% in April.
