Stagflationary Risks for India: WPI Surge and Imported Inflation
Why in the news
Retail inflation looks mild, yet wholesale prices are climbing fast. With an oil shock from the Iran conflict and slower growth forecasts, analysts warn of stagflation risk for India.
Key facts
| Indicator | Reading |
|---|---|
| CPI (retail) | 3.4%; base year 2024 |
| WPI (wholesale) | 3.88%, a 38-month high; base year 2011-12 |
| Crude oil | Up 64% in one month to about $114/barrel |
| Rupee | Fell about 3% in March |
| IMF FY27 growth view | 6.2% |
- Trigger: the US-Israeli conflict with Iran and the closure of the Strait of Hormuz.
Background
- Deceptively benign CPI: MSMEs that cannot export because of war-hit shipping are dumping goods at home, a temporary supply glut lowering prices while input costs rise.
- Imported inflation: import dependence is about 90% for crude oil and 50% for natural gas, so costlier oil, gas or a weaker rupee lifts prices of items from fertilizers to pharma raw materials.
- Stagflation: stagnant growth together with high inflation.
Exam angle
- CPI base year: 2024; WPI base year: 2011-12.
- Import dependence: about 90% crude, 50% gas.
- Related terms: imported inflation, supply glut, stagflation.