Wholesale inflation hits 42-month high at 8.3% as fuel hike triggers retail concerns

The fuel and power category recorded the highest inflation among major groups at 24.71% in April, compared with 1.05% in March. In the second full month of the West Asia crisis, all items under this segment exited the deflationary territory to record double-digit inflation. The fuel and power index rose 18.22% month-on-month to 181.7 in April from 153.7 in March, according to ANI. Crude petroleum inflation surged to 88.06% in April compared to 51.57% in the previous month, reflecting the sharp impact of the West Asia crisis. Within the fuel and power group, LPG inflation climbed to 10.92% in April from a contraction of 1.54% in March, while petrol inflation jumped to 32.40% from 2.50% and high-speed diesel inflation rose to 25.19% from 3.26%. ATF (aviation turbine fuel) inflation soared to 142% during the month. According to Barclays, the month-on-month increase in WPI inflation was the highest ever recorded in the current series. Despite a 50% spike in global crude oil prices, the government has so far held fuel pump and household LPG rates stable to shield households from the impact of the retail price rise of petrol, diesel and LPG, though prices of commercial LPG cylinders have been raised.

The fuel price revision is triggering significant cost pressures across transportation sectors, with freight rates for goods transported by road expected to rise by 2.5-3%, according to the All India Transporters Welfare Association (AITWA). The transporters' body noted that the industry has been facing cost pressure as prices of Diesel Exhaust Fluid or urea used in BS-VI vehicles have shot up by more than 50%, while that of tyres, lubricants, toll charges, and several other inputs have also increased. "Transporters are left with no option but to partially pass on the burden to customers," said Ashok Goyal, national president of the association. The All India Motor Transport Congress' former president Bal Malkit Singh highlighted that diesel alone contributes nearly 50-55% of total truck operating costs, making the fuel price hike particularly impactful. "With increases in fuel prices, tolls, insurance, tyres, maintenance and compliance expenses, transporters are struggling for survival," he added. The impact of the fuel price revision will start showing up in the May consumer price index (CPI) print, with full transmission likely from June onwards. Santosh Mehrotra, former Economic Advisor to the United Nations, criticized the government's recent diesel price hike, arguing it will worsen inflation across the board as "Diesel is an input into transportation costs... that will simply get absorbed by the truckers, but it will finally get passed on to the consumer."

The Primary Articles index increased by 2.58% in April 2026 to 202.4 (provisional) from 197.3 (provisional) in March 2026. However, the price rise appeared to be broad-based across major groups, with primary articles recording a 22-month high inflation of 9.17% in April, up from 6.36% in March. The Manufactured Products index increased by 1.40% to 151.6 (provisional) in April 2026 from 149.5 (provisional) in March 2026. Inflation in manufactured products, which have the highest weight in the WPI basket at 64.23%, rose to 4.62% in April from 3.39% in March. The government reported that 21 out of 22 manufacturing groups saw a month-on-month increase in prices. Major contributors included basic metals, chemicals and chemical products, textiles, food products and machinery and equipment. Among manufacturing segments, textiles inflation accelerated to 7.30% from 4.91%, while chemicals and chemical products inflation rose to 5.09% from 2.19%, reflecting the impact of higher petrochemical feedstock costs. Basic metals inflation increased to 7.00% from 4.01%, and cement prices also firmed with inflation in cement, lime and plaster rising to 2.38% from 1.07%. Core WPI inflation rose to 5% year-on-year, led by manufactured products including metals, chemicals, and textiles. Input costs also rose significantly for several industrial products, including sulphuric acid (61%), brass metal/sheet/coils (23.5%), copper wire (20.9%), aluminium powder (26.1%) and aluminium alloys (14.8%).

The increase in retail prices of petrol and diesel is expected to drive headline inflation print by 10-25 basis points (bps) in the coming months, with analysts cautioning that cascading impact of higher fuel costs could force RBI to reassess its inflation projections for the year. IDFC First Bank chief economist Gaura Sengupta said today's change in petrol and diesel prices will add 12 bps to headline CPI inflation, incorporating only the direct pass-through as May CPI inflation is estimated at 3.9%. "We expect a cumulative rise of up to 10% in retail petrol and diesel prices (including today's increase), spread over the next few months. Full-year FY27 CPI inflation is expected to average 4.9%," she said. Aditi Nayar, chief economist at ICRA Ratings expects the fuel price hike to push up the average retail inflation by 25 basis points (100 basis points equal a percentage point) on an annualised basis. "We are now revising our forecast for May 2026 to 4.3% from 4.1%," she said. According to Radhika Rao, senior economist at DBS Bank, higher pump prices are likely to moderate demand and consequently the import burden*. "Given the weightage of petrol and diesel in the CPI basket, a 3-5% increase likely adds 15-25 bps to the headline print, besides second round impact," she said. Economists warn that the concern is not merely the direct impact of fuel inflation, but also the second-round effects taking place through transportation, logistics, manufactured goods and services. Santosh Mehrotra noted that "For every USD 10 increase in the international price of oil, it increases our current account deficit by about 0.3 per cent of GDP. And simultaneously, that same USD 10 impact on the consumer price index is about roughly the same."

Madan Sabnavis, chief economist at Bank of Baroda, termed the multi-year high print as the "first sign of the impact of war on the Indian economy" and noted that "these numbers are also reflective of the pressure being exerted on the government to raise prices at the retail end." With the war showing no signs of abatement, the current "so-called ceasefire conditions" would still be associated with prices in the region of $100-120 per barrel, which will keep WPI inflation higher. Sabnavis said WPI inflation will continue to be elevated in the coming months unless there is a significant correction in international crude oil prices. "While WPI inflation is not a target for the MPC, it is known that with a lag, these prices also get transmitted to the CPI component through higher input costs. Therefore, these numbers remain important for policy formulation," he added. Looking ahead, CareEdge expects WPI inflation to average around 7.8% in FY27 under the base-case scenario, where global crude oil prices average around $90 per barrel, with a prolonged period of elevated oil prices leading to some pass-through to consumers. "The acceleration in WPI inflation raises the risk of second-round effects gradually spilling into retail inflation," said Rajani Sinha, chief economist at CareEdge Ratings. If oil marketing companies (OMCs) begin passing on fuel costs to consumers, next month's retail inflation could move up to the 3.8% to 4.2% range, with risks tilted toward the upper end. Santosh Mehrotra believes oil prices could easily touch USD 150 if the war continues, with spot prices for India already near USD 140. He also highlighted the rupee's depreciation, from "under 90 rupees to about 95 plus, nearly 96 to a dollar" in the last three months, as another inflationary trigger, noting that "When the rupee falls against the dollar, inevitably you'll have a situation where the RBI steps in... now the RBI has stopped doing that."