Inflation in India likely worsened in April. After the rate of retail price growth hit an eight-year high, inflation as tracked by our Wholesale Price Index has now reached an all-time high in its current series. According to the data released on Tuesday, it was 15.08% last month, while it was 14.55% in March. This is the 13th consecutive month that wholesale inflation has been in double digits.
Blame goods and food prices, which are on the boil due to supply shocks caused by Russia’s invasion of Ukraine. While the source of flare-ups is external, the high reading has become a headache for our policy makers. The Reserve Bank of India primarily monitors consumer inflation, and wholesale prices do not directly guide its monetary policy. But the subsequent increase means costly inputs that could drive up the retail price tag, and that too in bits and spurts, which are difficult to predict, complicating policy responses. Defenders of our central bank’s slow awakening to the problem of runaway prices often argue that tight money won’t solve it because it can’t ease supply. But in real terms, policy rates remain negative, and ultra-cheap loans tend to be inflationary.