India’s inflation based on the Wholesale Price Index (WPI) hit a fresh high in May, rising to 15.88 percent, according to data released by the Commerce Ministry on June 14. WPI inflation was 15.08 percent in April 2022 and 13.11 percent in May 2021. Another 10 percent-plus print in May means WPI inflation has extended its stay in double-digit territory to 14 months in a row.
The sharp rise in wholesale inflation in May comes a day after the Statistics Ministry said Consumer Price Index (CPI) inflation dropped to 7.04 percent last month – albeit thanks to a favourable base effect – from a 95-month high of 7.79 percent in April.-
At 15.88 percent, the WPI inflation print for May is the highest in the current series, data for which is available starting April 2013. As such, the latest wholesale inflation number is the highest in at least nine years. Economists had compared data from older WPI series and found inflation in April to be the highest in 30 years. As such, the even-higher May print is the highest in at least three decades.
Inflation was driven higher in May by a sequential increase in prices across the board. The overall all-commodities index of the WPI rose 1.4 percent month-on-month, while the index for primary articles rose 2.8 percent. Within primary articles, the index for food articles rose 2.4 percent from April, with price momentum particularly strong for vegetables (up 18.5 percent month-on-month).
The index for the fuel and power group was 2.3 percent higher in May compared to April, while that for manufactured products – which account for 64.23 percent of the WPI basket – rose 0.6 percent.
While the Reserve Bank of India’s (RBI) policy target is spelt out in terms of CPI inflation, wholesale prices hold clues for the future trajectory of retail prices.
CPI data released on June 13 meant retail inflation has now been above the RBI’s medium-term target of 4 percent for 32 consecutive months. More worryingly, it has now spent five months above the six percent upper bound of the 2-6 percent tolerance range. Given the central bank’s latest forecast, the Monetary Policy Committee will likely fail in meeting its inflation mandate in October, when CPI data for September will be released.
