Perspective on WPI Data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
Below the Perspective on WPI Data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
“WPI inflation rose sharply to 8.3% in April, significantly exceeding our expectations, as the impact of the West Asia crisis began feeding into wholesale prices. The uptick was primarily driven by a sharp increase in minerals and metals, crude oil, and natural gas prices. The acceleration in WPI inflation raises the risk of second-round effects gradually spilling into retail inflation.
Even if the West Asia conflict sees an early resolution, we expect global crude oil prices to average around USD 90/bbl in FY27 under our base-case scenario, with risks tilted further upward if geopolitical tensions persist for longer. So far, OMCs and the government have absorbed much of the rise in crude prices, but a prolonged period of elevated oil prices may lead to some pass-through to consumers. Additionally, concerns around a higher probability of an El Nino event this year pose upside risks to food inflation. Against this backdrop, we now expect WPI inflation to average around 7.8% in FY27 under the base-case scenario. We expect the RBI to maintain a status quo on policy rates. Given the lingering concerns around growth, the central bank is unlikely to rush into reversing the current rate cycle.”
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