Why Did Wholesale Inflation Increase In May?
India’s wholesale inflation accelerated sharply in May, driven by rising fuel, food and manufacturing costs amid elevated global energy prices. According to data released by the Ministry of Commerce and Industry, the Wholesale Price Index (WPI)-based inflation rose to 9.68% in May from 8.3% in April.
The increase comes as crude oil prices remained elevated due to geopolitical tensions in West Asia, pushing up input costs across multiple sectors and adding pressure to producer prices.
The latest figures indicate that inflationary pressures remain widespread despite signs of easing tensions following the US-Iran ceasefire agreement.
Which Sectors Contributed Most To Wholesale Inflation?
Fuel and power emerged as the biggest contributors to wholesale inflation during the month.
Inflation in the fuel segment climbed to 30.33% in May from 24.71% in April. Within this category, crude petroleum and natural gas inflation surged to 61.51%, while mineral oils recorded inflation of 49.82%.
The government identified mineral oils, crude petroleum and natural gas, chemicals and chemical products, along with basic metals, as the primary drivers behind the increase in wholesale prices.
Higher energy costs continued to impact industrial production expenses, resulting in broader inflation across manufacturing and commodity linked sectors.
How Did Manufacturing Inflation Perform?
Manufacturing inflation also witnessed an uptick during May.
Inflation in manufactured products rose to 7.48%, compared to 6.68% in April, reflecting higher input costs and pricing pressures across industrial categories.
Economists note that persistent energy inflation often filters into manufacturing costs, eventually impacting broader economic activity and corporate margins.
Did Food Inflation Continue To Rise?
Food inflation also moved higher during the month.
The WPI Food Index increased to 4.49% in May from 3.11% in April, indicating rising prices across agricultural commodities.
Meanwhile, inflation in primary articles rose to 4.99% from 3.78% a month earlier.
Higher food prices, combined with rising fuel costs, contributed significantly to the overall increase in wholesale inflation.
What Has Changed In The New WPI Series?
May marked the first release under India’s revised WPI series, which now uses 2022-23 as the base year, replacing the earlier 2011-12 series.
The government has expanded the WPI basket to 957 items from 697 previously. The revised index now includes renewable energy sources such as solar power, wind energy and nuclear electricity.
Additionally, crude petroleum and natural gas have been shifted from the primary articles category to the fuel and power segment to better reflect energy price trends.
Will WPI Be Replaced By Producer Price Indices?
Alongside the revised WPI framework, the government has introduced new Producer Price Indices (PPIs), including Output PPI, Trial Input PPI and Service PPI covering seven service sectors.
According to the Department for Promotion of Industry and Internal Trade (DPIIT), WPI will continue to be published alongside PPIs for the next five years before gradually being phased out in line with global statistical practices and recommendations from the International Monetary Fund (IMF).
What Does Rising Wholesale Inflation Mean For The Economy?
The sharp increase in wholesale inflation highlights the impact of global energy market volatility on India’s economy.
While easing geopolitical tensions may help stabilise commodity prices in the coming months, sustained increases in fuel and food costs could continue to influence production expenses, business profitability and broader inflation trends.
Economists will closely monitor energy prices and supply chain developments to assess whether wholesale inflation moderates in the second half of the year.
