WPI inflation in May: The month of may saw a 2.61 percent increase in wholesale inflation, mostly as a result of rising food item prices, food product manufacturing, the price of crude oil and natural gas, mineral oils, and other manufacturing. WPI inflation in April was 1.26 percent, driven up by higher costs for food items, gasoline, and electricity. Prior to that, the March WPI was reported at 0.53%.
According to official statistics released on Friday, wholesale inflation in India, as determined by the Wholesale Price Index, accelerated to a 15-month high of 2.61 percent on an annual basis in May 2023 as opposed to 1.26 percent in April 2023. Previously, WPI had dropped by 3.48 percent in May 2023. The figure increased significantly to 7.4% in May from 5.5% in April and 4.82 percent in May 2023. In May, fuel and power inflation remained very low, at roughly 1.4%. The inflation rate for manufactured goods increased to 0.8% in May, after falling to 0.4% in April.
In May, food inflation reached 9.82 percent, up from 1.63 percent the previous year. WholesWale vegetable prices rose 32.42 percent in May 2024, after falling 20.5% in the same month last year. Pulses costs jumped by 22%, compared to 5.8% a year before. Wholesale potato prices rose 64 percent in May, after falling 18.1 percent the previous year. Furthermore, wholesale onion price inflation surged to 58% in May 2024, up from 7.25 percent in May of the previous year.
According to a Reuters survey, WPI inflation is predicted to be 2.5 percent in April. ICRA also forecasted that WPI inflation would rise further to 2.0-3.0% in May, as the unfavorable base for goods like food and crude oil widened. The positive rate of inflation in May 2024 is mostly due to increases in food prices, food product manufacturing, crude petroleum and natural gas, mineral oils, other manufacturing, and so on, according to the press release.
During the June MPC, RBI Governor Shaktikanta Das stated that the central bank is vigilant for any upside risks to inflation, particularly food inflation, which might derail the path of disinflation. The government also revealed India's retail inflation statistics, which showed that it fell to a 12-month low in May of 4.75 percent on an annual basis, down from 4.83 percent the previous month.
The Reserve Bank of India lifted the repo rate by 250 basis points to 6.5 percent in May 2022, but has maintained it there for eight consecutive sessions in an effort to battle inflation. This monetary policy instrument usually decreases demand in the economy, which helps to control inflation. The recent RBI monetary policy meeting minutes show continued inflation uncertainty, notably from shifting food prices, which may have an influence on the inflation forecast. These growing food costs are hurting India's present attempts to control inflation and posing hurdles to meeting the 4% medium-term objective.
