India’s wholesale inflation accelerated sharply in May, with the Wholesale Price Index (WPI)-based inflation rising to 9.68%, up from 8.26% in April, driven by higher fuel, food and manufacturing costs. The latest reading exceeded market expectations of around 9.1%, highlighting persistent cost pressures across the economy.
Key Highlights
- Wholesale inflation surged to 9.68% in May, driven by rising fuel, food and manufacturing costs.
- Fuel and power inflation jumped to 30.33%, emerging as the biggest contributor to WPI growth.
The surge in wholesale inflation was largely attributed to elevated energy prices following geopolitical tensions in West Asia, which pushed up global crude oil prices and increased production costs across several industries. The May print marks the first major release under the government's revised WPI series with 2022-23 as the base year, replacing the earlier 2011-12 series.
Fuel and Power Inflation Remain Key Drivers
Among major categories, fuel and power inflation emerged as the biggest contributor, climbing to 30.33% in May from about 24.89% in April. Inflation in crude petroleum alone surged above 61%, reflecting the impact of higher global energy prices on domestic wholesale markets.
Food inflation also strengthened during the month. The WPI Food Index rose to 4.49% compared with 3.11% in April, while inflation in primary articles increased to nearly 5% from 3.78% a month earlier. Rising prices of food commodities and agricultural products added to the overall inflationary pressure.
Meanwhile, inflation in manufactured products, which carry the largest weight in the WPI basket, increased to 7.48% from 6.68% in April. Higher prices of chemicals, basic metals, mineral oils, crude petroleum and natural gas contributed significantly to the increase, indicating that elevated input costs continue to affect industrial production.
New WPI Series Expands Inflation Measurement
The revised WPI framework significantly broadens the commodity basket from 697 items to 957 items, reflecting structural changes in the Indian economy. The updated series also includes emerging energy sources such as solar, wind and nuclear power, providing a more comprehensive picture of producer-level price trends.
Also Read: India to Replace WPI with Producer Price Index from June 15
In addition, the government introduced new producer-price indicators, including the Output Producer Price Index (OPPI), Input Producer Price Index (IPPI) and Service Producer Price Indices for sectors such as banking, insurance, telecommunications, railways and air transport. These measures are aimed at strengthening inflation monitoring and aligning India’s statistical framework with global best practices.
Outlook Hinges on Energy Prices
Economists believe the trajectory of wholesale inflation will largely depend on global crude oil movements. Recent signs of easing tensions in West Asia and expectations of improved energy supplies have already pushed oil prices lower, which could help moderate inflationary pressures in coming months.
However, with fuel, food and manufacturing costs remaining elevated, wholesale inflation continues to signal underlying price pressures that businesses and policymakers will closely monitor in the months ahead.
