NEW DELHI: India’s wholesale inflation, a measure of what producers pay, leapt to a record high of 15.88% (year-on-year) in May compared to 15.08% in April, the highest in three-decades, official data on Tuesday showed.
The figure in May, measured by the wholesale price index (WPI), climbed the most in the current inflation series starting April 2013, staying in double digits for 14 straight months.
Sharply higher producer-end prices signal persistent pressures from a global commodity price spiral, costlier oil and choked supplies lines exacerbated by the Russia-Ukraine conflict. The continuing double-digit sprint in wholesale rates points to a larger potential of inflation being transmitted to consumers in the months ahead, analysts said.
A big chunk of the wholesale inflation was driven by food prices, data showed. The WPI Food Index accelerated to 10.89% in May 2022, compared to 8.88% in April 2022.
The over-10% increase in wholesale prices comes a day after India’s retail inflation declined modestly to 7.04% (year-on-year) in May, compared to an eight-year high of 7.8% in April, aided by a favourable base effect.
Wholesale prices were driven by “prices of mineral oils, crude petroleum and natural gas, food articles, basic metals, non-food articles, chemicals and chemical products, and food products, etc., as compared to the corresponding month of the previous year”, a data statement released by the Union ministry of commerce and industry said. Bulk prices in May 2021 stood at 13.11%.
Inflation in primary articles, and fuel and power were the key drivers of the wholesale inflation in May 2022. While primary articles inflation recorded a new high of 19.71% in May 2022, fuel and power inflation stood at 40.62% (the second-highest level in the 2011-12 series).
The key drivers of inflation in primary articles were crude oil and natural gas (at 79.5%, a seven-month high), minerals (at 33.94%, a record high), fruits and vegetables (at 32.31%, a 29-month high) and non-food articles (at 24.14%).
“The sustained pressure on wholesale inflation due to rising input costs, which is being passed on to output prices, continues unabated, and that is why despite a high base, the WPI inflation scaled to a fresh high. With this, the WPI inflation has now been in double digit for 14 consecutive months, and historically at the highest level since September 1991,” Sunil Kumar Sinha, principal economist at India Ratings and Research, said.
Consumer prices, however, continued to breach the Reserve Bank of India’s upper limit of 6% for the fifth straight month, squeezing household incomes.
Retail inflation, which has stayed above the central bank’s target of 4 (+/-2)%, averaged 6.7% in 2022-23. Some economists fear price pressures triggered by the Ukraine conflict and supply bottlenecks could trigger a return to the 1970s-era inflation and slowing growth, stoking fears of a recession.
Rising consumer prices have presented a challenge for the central bank, which has hiked rates by 90 basis points over the past 30 days to tame prices.
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