India’s wholesale price index inflation soared to 9.68 per cent in May, driven by a sharp increase in the costs of fuel, food, and manufactured items, reflecting global geopolitical tensions and their impact on the domestic economy.
Photograph: Rupak De Chowdhuri/Reuters
Key Points
- Wholesale price inflation in India escalated to 9.68 per cent in May, a notable increase from 8.26 per cent in April.
- The surge is largely attributed to a sharp rise in prices across fuel and power (30.33%), crude petroleum (61.51%), and manufactured products (7.48%).
- Food article inflation also contributed significantly, rising to 3.60 per cent in May.
- The West Asia crisis and the effective blockade of the Strait of Hormuz are cited as key factors impacting crude oil and subsequently food prices.
- The Reserve Bank of India has revised its inflation projection for the current fiscal year to 5.1 per cent, factoring in higher global energy prices.
Wholesale price inflation shot up to 9.68 per cent in May, from 8.26 per cent in April, led by a sharp spike in prices of fuel and power, manufactured and food items.
The Commerce and Industry Ministry on Monday released the Wholesale price index (WPI)-based inflation data revising the base year to 2022-23, from 2011-12 earlier.
Key Drivers of Inflationary Pressure
Wholesale price index (WPI)-based inflation in fuel and power jumped to 30.33 per cent in May as against 24.89 per cent in April.
In crude petroleum, inflation was 61.51 per cent in May, as against 56.31 per cent in the previous month.
The sharp rise in WPI inflation reflects the impact of the West Asia crisis and the effective blockade of the Strait of Hormuz through which the majority of the crude oil is imported to India, and its spillover effect on food prices.
Impact on Food and Manufactured Goods
Inflation in food articles was 3.60 per cent in May, compared to 2.43 per cent in April.
In manufactured products, inflation rose to 7.48 per cent in May, from 6.68 per cent during April, data showed.
Retail or consumer price index based inflation too had surged to a 16-month high of 3.93 per cent in May, as against 3.48 per cent in the previous month.
RBI’s Stance and Future Outlook
The Reserve Bank of India (RBI), which mainly factors in CPI when arriving at its monetary policy, has been mandated by the government to ensure that headline inflation remains at 4 per cent, with a 2 per cent margin on either side.
Earlier this month, the RBI raised its inflation projection for the current fiscal year to 5.1 per cent from 4.6 per cent, largely due to mounting input costs, driven by the pass-through of higher global energy prices to retail petrol and diesel prices.
Rising global crude oil prices had led to Rs 7.50 a litre increase in petrol and diesel prices in the second half of May.
