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Below the Quote on WPI announcement by Rajani Sinha, Chief Economist, CareEdge Ratings

“India’s wholesale price inflation rose to 3.9% in March, exceeding expectations and taking the annual average to 0.7%. Primary articles led the increase at 6.4%, followed by manufactured products at 3.4%, while fuel and power edged up to 1.1%. The latest WPI data reflects a stronger impact of the West Asia crisis, rising by 1.7 pp compared to a modest 0.2 pp increase in retail inflation compared to February prints. This divergence is driven by a sharp increase in the bulk diesel and other commercial fuel prices, while retail petrol and diesel prices remained unchanged. Refineries raised bulk diesel prices by over 25% in March amid the crisis. Similarly, domestic gas cylinders saw a Rs 60 increase, whereas commercial cylinders recorded a much steeper cumulative hike of Rs 310. The sharp uptick in WPI heightens the risk of second-round effects gradually feeding into retail prices.

Even with early resolution of the West Asia crisis, global crude oil prices are still likely to average a high of USD 85-90/ bbl in FY27. The burden of higher global crude oil prices will be shared by households, government, and OMCs. So far, OMCs have benefited from strong gross refining margins and based on our estimates, may be able to absorb an increase in Brent crude prices up to USD 100-105/bbl. While there will be limited pass through to retail consumers, there will be an indirect impact with rising input prices. Moreover, there are also concerns around the higher probability of El Nino this year, with adverse implications for food inflation. We expect WPI inflation to average around 5% in FY27, assuming brent crude oil prices at $90/bbl. We expect the RBI to maintain status quo on policy interest rate. Given the lingering growth concerns, the RBI will not be in a hurry to reverse the rate cycle. In fact, it can explore the possibility of a rate cut towards the end of the fiscal year if the growth outlook deteriorates significantly below the long-term potential growth.”

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