RBI warns of high wholesale prices feeding into retail inflation

The Reserve Bank warned on Friday that there is a risk of high wholesale price inflation (WPI) exerting pressure on retail inflation.

The Reserve Bank of India (RBI) said in its annual report that cost-push pressures from high industrial raw material prices, transportation costs and global logistics, and supply chain bottlenecks continue to have an impact on core inflation.

"The substantial wedge between wholesale and retail price inflation amidst a sharp rise in manufactured products' inflation poses the risk of a possible passthrough of input cost pressures to retail inflation with a lag, although slack in the economy is muting the pass-through," the central bank stated.


The situation in Ukraine, as well as the resulting surge in commodity prices, has clouded the forecast for inflation in India and the rest of the world, according to the report.

To keep costs from spiralling out of control, the government recently reduced excise duties on petrol and diesel, as well as waiving import duties on several raw materials used in the steel and plastic industries. In addition, export duties on iron ore and iron pellets have been raised.

In April, rising prices across the board, from fuel to veggies and cooking oil, drove WPI or wholesale price inflation to a new high of 15.08 percent, and retail inflation to a nearly eight-year high of 7.79 percent.

High inflation prompted the Reserve Bank to hold an unscheduled meeting to raise the benchmark interest rate by 40 basis points to 4.40 per cent earlier this month.