The government’s decision to raise petrol and diesel prices by ₹3 per litre is expected to push up retail inflation by 15-25 basis points in the coming months, with economists warning that the combined impact of higher fuel costs, increased import duty on precious metals and revised minimum support prices (MSP) for kharif crops could force a reassessment of inflation projections for the year.
The latest fuel price increase comes at a time when wholesale inflation has already begun reflecting mounting cost pressures. Retail inflation, based on the Consumer Price Index (CPI), stood at 3.5 per cent in April, remaining within the Reserve Bank of India’s comfort range. However, wholesale inflation, measured by the Wholesale Price Index (WPI), surged to a 42-month high of 8.3 per cent in April, driven in large part by a sharp rise in fuel and power inflation.
More hikes likely
Economists now expect the impact of the fuel price revision to start showing up in the May CPI print, with the full transmission likely from June onwards. Several analysts also indicated that the latest increase may not be the last if global crude oil prices remain elevated.
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