Indian Economy facing serious inflationary pressure due to Iran war

Sharp rise in wholesale prices has started biting consumers

By Dr. Gyan Pathak

Though the April retail inflation based on Consumer Price Index (CPI) rose only a little to 3.48 per cent from the March inflation 3.40, and year on year food inflation based on Consumer Food Price Index to 4.20 per cent from 3.87, which is still within the tolerable limit of 2-6 per cent, situation is likely to change for the worse within weeks. Wholesale inflation is rising sharply, and it will soon go beyond the ability and capacity of the Union government to prevent passing it to the consumers, which it has been doing in the last three months, chiefly on account of the elections in states.

The wholesale inflation for all commodities in February 2026 on year on year basis was only 2.6 per cent. However, after the Israel and US aggression on Iran, it went up to 3.88 per cent and in April 8.30 per cent. The data for April is provisional and it is over the April 2025 data.

The wholesale inflation of primary articles was 3.21 per cent in February 2026, which rose to 6.36 per cent in March, and 9.17 per cent in April.

The sharpest rise in wholesale inflation was noticed in fuel and power. There was actually deflation of (-)3.85 per cent in February 2026, but it turned into inflation of 1.05 per cent in March, and jumped to 24.71 per cent in April.

For manufactured products, the wholesale inflation in February was 3.13 per cent which rose to 3.39 per cent in March and 4.62 per cent in April.

The wholesale food inflation was 1.85 per cent in February 2026, which remained that the same level in March and rose to 2.31 per cent.

The month on month change in WPI index shows that rise has been very sharp. Just in the beginning of the year in January 2026, the change in WPI for all commodities was just 0.25 per cent, that has rose to 1.53 per cent in March and 3.86 per cent in April.

For primary articles month on month change in WPI in January 2026 was in negative just at (-)0.10 per cent, which sharply rose to 2.33 per cent in March, and 2.58 per cent in April. The Price of crude petroleum & natural gas (16.42%), food articles (1.41%) and minerals (0.91%) increased in April 2026 compared to March 2026. The Price of non- food articles (-0.94%) decreased in April 2026 compared to March 2026.

For fuel and power, the month on month WPI was (-)1.62 per cent which rose to 1.10 per cent in February, 4.20 per cent in March, and 18.22 per cent in April. The Price of mineral oils (29.37 %) increased in April 2026 compared to March 2026. The Price of electricity (-2.53%) decreased in April 2026 compared to March 2026.

For manufactured products, the month on month WPI change was 0.82 per cent in January which rose to 1.40 per cent in April. Out of the 22 NIC two-digit groups for manufactured products, 21 groups witnessed an increase in prices and 1 group witnessed a decrease in prices. Some of the important groups that showed month-over-month increase in prices were manufacture of basic metals; chemicals and chemical products; textiles; food products and machinery and equipment etc. The group that witnessed a month-over-month decrease in price in April 2026 was other manufacturing.

And for food, it has risen to 1.19 per cent in April from (-)0. 77 per cent in January 2026.The rate of inflation (Y-o-Y) based on WPI Food Index increased from 1.85% in March 2026 to 2.31% in April 2026.

The wholesale inflation rate for all commodities rose from 0.85 per cent in April 2025 to 8.30 per cent in April 2026; milk from 1.8 per cent to 2.56 per cent; Eggs, Meat and Fish from (-)0.29 per cent to 6.68 per cent.

Among non-food article oil seeds wholesale inflation rose from 1.95 per cent in April 2025 to 22.24 per cent in April 2026. For all non-food article it rose from 1.52 per cent to 12.18 per cent during this period.

Wholesale inflation in minerals was 1.29 per cent in April 2025 which rose to 12.15 per cent in April 2026.

Sharpest rise was in crude petroleum and natural gas, which rose from (-)15.55 per cent in April 2025 to 67.18 per cent in April 2026. As for crude petroleum it was even sharper from (-)19.85 per cent to 88.06 per cent.

During this period wholesale inflation of fuel and power rose from (-)3.76 to 24.71, LPG from (-)0.41 per cent to 10.92 per cent, Petrol from (-)7.70 per cent to 32.24 per cent, and high speed diesel from (-)5.04 per cent to 25.19 per cent.

Obviously, this high level of wholesale inflation will have to be passed to consumers, as the Union Government has already indicated. The difference between high wholesale inflation and low retail inflation is not sustainable, and it will distort the dynamics of the economy and finance. A hard time is really knocking at our door. There are other climate and geopolitical risks too. The government and the citizens must be prepared for the hard times, since it will also impact earning of the people, cause job losses, and high cost of living. (IPA Service)