Wholesale price inflation rose sharply to an over 3-year high of 3.88 per cent in March, driven by a sharp spike in rates of fuel, power and manufactured items amid the West Asia crisis.
Government data released on Wednesday showed that the Wholesale Price Index (WPI)-based inflation rose for the fifth straight month in March as core inflation accelerated, amid softening of primary food items. As higher energy prices eventually generalise to other commodity prices, we expect WPI inflation to rise further in the coming months.
The high WPI inflation in March reflects elevated global commodity prices and the impact of the energy price shock since the beginning of the US-Israel-Iran conflict on February 28.
WPI inflation was 2.13 per cent in February, and 2.25 per cent in March last year.
“Positive rate of inflation in March 2026 is primarily due to increase in prices of crude petroleum & natural gas, other manufacturing, non-food articles, manufacture of basic metals and food articles, etc.,” the industry ministry said in a statement.
According to the latest WPI data, inflation in the fuel and power basket spiked to 1.05 per cent in March, from a deflation of 3.78 per cent in February.
Inflation in crude petroleum surged to 51.57 per cent during March, against a deflation of 1.29 per cent in the previous month.
Manufactured products inflation rose to 3.39 per cent in March, from 2.92 per cent in February.
Barclays, in a research note, said that March WPI is the sharpest month-onmonth increase seen since August 2023.
“As global energy prices stay elevated and eventually trickle to other commodity prices, we expect WPI inflation to rise further going ahead,”
Barclays said, adding that it expects RBI to persist with a pause in interest rates through 2026.
During March, the pace of hike in food articles prices, however, eased to 1.90 per cent, from 2.19 per cent in February.
In vegetables, inflation softened to 1.45 per cent in March, against 4.73 per cent in February.
WPI inflation in FY26 averaged at 0.7 per cent, lower than the 2.3 per cent average seen in FY25.
Bank of Baroda Economist Sonal Badhan, in a note, said that going forward, if international oil prices remain elevated, then it may impact overall WPI in the coming months.
Global crude oil prices surged to USD 122/barrel early in March, driven by the ongoing conflict in West Asia and associated disruptions to global energy supply chains. The prices were hovering around USD 75/barrel before the conflict.
“If a peace deal is not reached soon, then a prolonged war can have impact on domestic fuel inflation. Pressure on the rupee may also exert some upward pressure,” Badhan said.
The government, on March 26, reduced excise duty by Rs 10 per litre on both petrol and diesel to ensure that fuel retailers do not pass on the higher crude oil price to consumers.
The excise duty cut decision was taken in response to the steep and rapid rise in international crude oil prices, which had surged from approximately USD 70 per barrel to around USD 122 per barrel over the month — an increase of nearly 75 per cent in under four weeks, driven by the ongoing conflict in West Asia and associated disruptions to global energy supply chains.
Consumer price index-based retail inflation rose 3.4 per cent in March compared to 3.21 per cent in the preceding month, mainly due to an uptick in certain food items, data released earlier this week showed.
The Reserve Bank of India (RBI) in its first bi-monthly monetary policy earlier this month kept benchmark policy rates unchanged at 5.25 per cent.