Even as the International Monetary Fund projects India’s economy to grow at 6.5 per cent in 2026–27, government data released on Wednesday showed that the country’s wholesale price inflation hit a 38-month high of 3.88 per cent in March, driven by a sharp rise in fuel, power and manufactured goods prices amid the West Asia crisis.
Wholesale Price Index (WPI)-based inflation increased for the fifth consecutive month in March, with core inflation picking up even as primary food prices softened.
The March print reflects elevated global commodity prices and the impact of the energy price shock since the onset of the US-Israel-Iran conflict on February 28. With higher energy costs expected to feed into broader commodity prices, WPI inflation is likely to firm up further in the coming months.
WPI inflation stood at 2.13 per cent in February and 2.25 per cent in March last year.
However, India’s economy is projected to grow at a steady 6.5 percent in the financial year 2027, maintaining its position as the fastest-growing major economy, the International Monetary Fund said on Tuesday, even as escalating tensions in West Asia weigh on the global outlook.
“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.
Data showed that inflation in the fuel and power basket rose 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 in March, compared with a deflation of 1.29 per cent in the previous month.
Inflation in manufactured products increased to 3.39 per cent in March from 2.92 per cent in February.
Barclays, in a research note, said the March WPI reading marked the sharpest month-on-month increase since August 2023.
“As global energy prices remain elevated and gradually pass through to other commodity prices, we expect WPI inflation to rise further,” Barclays said, adding that it expects the RBI to maintain a pause in interest rates through 2026.
Food price pressures, however, eased during the month. Inflation in food articles slowed to 1.90 per cent in March from 2.19 per cent in February. Vegetable inflation also moderated to 1.45 per cent from 4.73 per cent.
On an annual basis, WPI inflation averaged 0.7 per cent in FY26, lower than 2.3 per cent in FY25.
Bank of Baroda economist Sonal Badhan said that if international oil prices remain elevated, they could push up overall WPI inflation in the coming months.
Global crude oil prices surged to USD 122 per barrel in early March, up from around USD 75 per barrel before the conflict, amid disruptions to global energy supply chains.
“If a peace deal is not reached soon, a prolonged conflict could impact domestic fuel inflation. Pressure on the rupee may also add to upward price pressures,” Badhan said.
To cushion consumers, the government on March 26 cut excise duty by Rs 10 per litre on both petrol and diesel, aiming to prevent the full pass-through of higher crude prices. The decision followed a steep rise in global oil prices—from about USD 70 per barrel to around USD 122 per barrel within a month, an increase of nearly 75 per cent.
Meanwhile, retail inflation based on the Consumer Price Index (CPI) rose to 3.4 per cent in March from 3.21 per cent in February, largely due to an uptick in certain food items.
The Reserve Bank of India (RBI), in its first bi-monthly monetary policy review earlier this month, kept the benchmark policy rate unchanged at 5.25 per cent.
(With inputs from PTI)
