India’s Wholesale Prices Unexpectedly Rise to Three-Decade High

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New Delhi (Bloomberg) – India’s wholesale inflation quickened to the fastest pace in three decades on input costs fueled by high commodity prices and supply constraints.

Wholesale prices rose 14.2% in November from a year earlier, data released by the Commerce Ministry showed Tuesday. That’s faster than the median estimate of an about 12% gain in a Bloomberg survey of 19 economists, and is the highest level since December 1991 when the print came in at 14.3%.

Factory-gate inflation has stayed in double digits this financial year that began in April as companies pay more for raw materials amid a rally in global commodity prices and a supply crunch.

The spike “has come as a shock,” said Aditi Nayar, chief economist at ICRA Ltd., the Indian unit of Moody’s Investors Service. Most non-core categories displayed “an inflation rate that was much steeper than expected,” she said.

Digging Deeper

  • Prices of food articles rose 4.9%, fuel and power prices jumped 39.8%, and manufactured products posted an increase of 11.9%
  • Data released separately on Monday showed retail inflation inched closer to 5% in November, amid rising costs of food and commodities
  • A sustained rise could threaten the Reserve Bank of India’s case for keeping borrowing costs lower for longer to support the economy, given it has a mandate to keep consumer price inflation within its target band of 2%-6%. The RBI last week left key lending rates unchanged and vowed to keep the accommodative policy stance for as long as needed to support a durable economic recovery