Producers’ inflation based on the wholesale price index (WPI) raised to a 30 year high of 15.9% in May, driven by an across the board rise in prices led by crude petroleum, metals and food products. The print for April was 15.1% and was 13.11% in May 2021. In contrast, retail inflation in May, based on the consumer price index (CPI), dulled to 7.04% from 7.79% in April.
On the latest WPI number, the Office of the Economic Advisor, under the Department for Promotion of Industry and Internal Trade, said, “The high rate of inflation in May is mainly due to the rise in prices of mineral oils, crude petroleum and natural gas, food articles, basic metals, non-food articles, chemicals and chemical products, food products, etc. as compared to the corresponding month of the last year.”
While the core (non-food manufacturing) WPI inflation witnessed a base effect led moderation in May, it continued to remain in double digits for the fourth consecutive month. However, the month on month increase in the core WPI stood at a five month low at 0.5% in May. But with inflation in industrial raw materials remaining stubbornly fixed, core inflation is likely to remain above 9% for the next few months.
Given the weight of oil and fuel items (10.4 per cent) in the WPI basket, the rise in global crude oil prices is expected to put upward pressure on the headline WPI print for June. Further, the weakening of the rupee against the U.S. dollar is likely to increase the cost of imports, posing upside.
Rajani Sinha, Chief Economist with Care Edge, said increased crude oil prices, LPG price hikes and electricity tariff revisions contributed to the rise in fuel and power inflation. There was some moderation in manufactured products inflation which is a good news.