Wholesale price inflation in India climbed sharply to 9.68 per cent in May, up from 8.26 per cent in April, marking the highest reading in the current series that uses a 2022-23 base year. The increase was driven primarily by higher costs in fuel and power, alongside upward pressure on food and manufactured goods.
This acceleration highlights the ongoing effects of geopolitical tensions in West Asia, including disruptions affecting crude oil imports through key routes like the Strait of Hormuz. These developments have contributed to elevated global energy prices that have filtered through to the domestic economy.
The fuel and power category, which carries a significant weight in the index, saw its inflation rate rise to 30.33 per cent in May from 24.89 per cent the previous month. Within this, crude petroleum inflation stood at 61.51 per cent, compared to 56.31 per cent in April. Food article prices also accelerated, reaching 3.60 per cent inflation in May against 2.43 per cent in April. Inflation in manufactured products increased to 7.48 per cent from 6.68 per cent over the same period.
Officials have updated the wholesale price index methodology, shifting the base year to 2022-23 for the first time in nearly a decade. The revised basket now includes 957 items, up from 697, incorporating additional energy sources such as solar, wind, and nuclear power under the electricity group. At the same time, producer price indices were introduced for the first time to better track factory gate prices for both inputs and outputs across industries. Services producer price indices were also released covering sectors including banking, insurance, railways, air travel, and telecom.
Authorities plan a gradual transition away from the wholesale price index toward producer price indices over the coming years to align with international standards. This dual approach is intended to provide clearer insights into how input cost changes affect final output prices.
Wholesale inflation remained notably higher than consumer price inflation for the second straight month. Retail inflation rose to 3.93 per cent in May from 3.48 per cent in April, reaching a 16-month high. The central bank, which focuses primarily on consumer prices for monetary policy decisions, has a target of 4 per cent headline inflation with a tolerance band of plus or minus 2 per cent. Earlier in the month, it revised its full-year inflation forecast upward to 5.1 per cent. Rising global crude costs also prompted a Rs 7.50 per litre increase in petrol and diesel prices in the latter half of May.