WPI inflation hits 38-month high at 3.88 pc in March on fuel surge amid Iran war

Wholesale price inflation rose to a 38-month high of 3.88 per cent in March, driven by a sharp increase in fuel, power and manufactured goods prices amid the West Asia crisis, according to government data released on Wednesday.

The Wholesale Price Index (WPI)-based inflation has now risen for the fifth consecutive month, reflecting elevated global commodity prices and the impact of the ongoing conflict involving the US, Israel and Iran since 28 February.

WPI inflation stood at 2.13 per cent in February and 2.25 per cent in March last year.

The surge was led by a sharp rise in energy prices. Inflation in the fuel and power basket rose to 1.05 per cent in March, compared to a contraction of 3.78 per cent in February.

Crude petroleum inflation saw a dramatic jump to 51.57 per cent during the month, reversing a deflation of 1.29 per cent in February.

The Ministry of Commerce and Industry said the increase was “primarily due to increase in prices of crude petroleum & natural gas, other manufacturing, non-food articles, manufacture of basic metals and food articles”.

Manufacturing prices rise

Inflation in manufactured products also picked up to 3.39 per cent in March from 2.92 per cent in the previous month, indicating a broader pass-through of higher input costs.

Analysts noted that rising energy prices were beginning to feed into core inflation.

Barclays said in a research note that March saw the sharpest month-on-month increase in WPI since August 2023 and warned that inflationary pressures could persist.

“As global energy prices stay elevated and eventually trickle to other commodity prices, we expect WPI inflation to rise further going ahead,” it said, adding that it expects the Reserve Bank of India to maintain a pause on interest rates through 2026.

In contrast, primary food inflation showed signs of moderation.

Inflation in food articles eased to 1.90 per cent in March from 2.19 per cent in February. Vegetable inflation also softened sharply to 1.45 per cent from 4.73 per cent.

Oil shock from West Asia conflict

Global crude oil prices surged to about USD 122 per barrel in early March, up from around USD 70 before the outbreak of conflict in West Asia, marking a steep rise of nearly 75 per cent within weeks.

Economists said sustained high oil prices could continue to exert upward pressure on wholesale inflation.

Bank of Baroda economist Sonal Badhan said that if international oil prices remain elevated, domestic fuel inflation could rise further, also impacting the rupee.

Govt response, outlook

The government cut excise duty by Rs 10 per litre on petrol and diesel on 26 March to prevent a full pass-through of rising global crude prices to consumers.

For FY26, WPI inflation averaged 0.7 per cent, lower than the 2.3 per cent recorded in FY25.

Retail inflation, measured by the Consumer Price Index, rose to 3.4 per cent in March from 3.21 per cent in February, mainly due to higher food prices.

The RBI, in its latest monetary policy earlier this month, kept the benchmark policy rate unchanged at 5.25 per cent.

Economists said the trajectory of inflation will depend largely on global energy prices and the duration of the ongoing geopolitical tensions.