The 4.4 percentage point increase between the March and April prints of the Wholesale Price Index (WPI) is the biggest increase between two consecutive monthly inflation readings in the current WPI series. Even analysts did not expect such a big increase in the WPI numbers. A Bloomberg poll of economists expected April WPI growth at 5.5%, almost three percentage point less than the actual number, perhaps a record miss for the analysts too.

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What really happened? It is almost entirely the oil shock. The numbers are unambiguous.

There are two key components in the WPI basket which cover petroleum-based fuel: crude oil and natural gas in the primary product category with a weight of 2.4% and mineral oil in the fuel and power category with a weight of 7.9%. The former is what India overwhelmingly imports. The latter is produced by processing these imports, but also imported directly. The crude oil component has seen prices increase by 67.2% on an annual basis in April . The mineral oil category has seen an increase of 39.5%. These two sub-categories, which have a share of just above 10% in the overall WPI basket, account for almost all of the increase in the headline WPI growth. Wholesale inflation increased from 2.3% in February (pre-war) to 3.9% in March and 8.3% in April. If one were to take out the primary commodity-crude and natural gas and fuel and power-mineral oil categories, wholesale inflation numbers would have been 3.1%, 3.1% and 4.2% in February, March and April.

To be sure, it is not just the increase in petroleum prices which is leading to higher inflation. The rupee’s depreciation is adding to the pain. Just one comparison will suffice. India’s crude oil basket was priced at $114.1 per barrel in April , according to petroleum ministry data available with the Centre for Monitoring Indian economy. This is almost the same as $113.7 per barrel in March 2022, the month after the Russia-Ukraine war broke out. The WPI index for the crude oil and natural gas category for the two periods is drastically different: 151.6 in March 2022 and 229.6 in April 2026. The rupee was trading at 76 to the dollar in 2022; in April this year, this was around 93.4.

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What about the rest of the WPI data? Its food component has increased from 1.9% in March to 2.3% in April. Manufacturing inflation increased from 3.4% to 4.6%, suggesting that some of the pass-through in input prices might already be happening.

Analysts believe a fuel price hike is coming and that annual inflation will end up higher than the RBI’s earlier estimates but say it is still early days as far as an interest rate hike from RBI is concerned. India has already increased the import duty on precious metals in an effort to curb imports of gold, silver and platinum, and the Prime Minister has appealed to people to be prudent in their consumption of both energy and foreign exchange.

“While wholesale price inflation is reflecting the rise in energy prices, retail inflation was contained in April. CPI (Consumer Price Index) inflation inched up to 3.48% y/y (year on year) in April from 3.4% y/y in March, even as core CPI inflation was unchanged at 3.7% y/y. Retail fuel prices have been maintained since the start of the conflict, but we think a ₹5/litre hike for both petrol and diesel is imminent in May, as crude oil prices remain elevated. Accordingly, we revised up our FY27 (2026-27)  CPI inflation forecast to 4.5% y/y (vs. 4.0% y/y previously, RBIe 4.6% y/y). The recently announced increase in import duty on gold and silver may raise inflation further, adding ~10bp, when fully passed through. Separately, the recently announced minimum support price for kharif crops for the current marketing season is unlikely to be a near-term headwind. We estimate a 5-10bp impact on headline CPI inflation emanating from the support prices in FY27. We expect the MPC (monetary policy committee of the Reserve Bank of India to look through the supply-shock-driven increase in inflation and persist with a pause for the remainder of 2026”, Barclays economists Aastha Gudwani and Amruta Ghare said in a note.

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“Even if the West Asia conflict sees an early resolution, we expect global crude oil prices to average around $90/bbl in FY27 under our base-case scenario, with risks tilted further upward if geopolitical tensions persist for longer. So far, OMCs (oil marketing companies) and the government have absorbed much of the rise in crude prices, but a prolonged period of elevated oil prices may lead to some pass-through to consumers. Additionally, concerns around a higher probability of an El Nino event this year pose upside risks to food inflation.” said Rajani Sinha, chief economist at CareEdge Ratings. “Against this backdrop, we now expect WPI inflation to average around 7.8% in FY27 under the base-case scenario. We expect RBI to maintain a status quo on policy rates. Given the lingering concerns around growth, the central bank is unlikely to rush into reversing the current rate cycle,” she added.