The wholesale price inflation accelerated for the third consecutive month in May, reaching a 15-month high of 2.61 per cent, driven primarily by a surge in food prices, according to data released by the ministry of commerce and industry on Friday.
Economists said the data paints a picture of rising wholesale prices, driven by food costs and global factors. While this contrasts with the recent decline in retail inflation, it raises concerns about future price pressures and potential challenges for the RBI’s monetary policy stance.
The main culprit behind the soaring wholesale inflation was a sharp increase in food article prices, which jumped to a 10-month high of 9.82 per cent in May compared with 7.74 per cent in April.
This rise was fueled by a significant increase in vegetable prices, particularly onions (58.05 per cent) and potatoes (64.05 per cent). Pulses inflation also remained elevated at 21.95 per cent.
While fuel and power inflation remained subdued at 1.35 per cent, manufactured product inflation was higher at 0.78 per cent against -0.42 per cent in April. Analysts attributed this uptick to rising global metal prices driven by supply chain disruptions and a potential demand pick-up from China.
Aditi Gupta, an economist at Bank of Baroda, noted that the uptick in WPI inflation is largely because of elevated food prices, particularly vegetables and fruits.
She also highlighted the potential for further pressure from global commodity prices and severe heatwaves impacting domestic production. Progress of monsoon will play a key role in determining the trajectory of food inflation going forward.
Icra chief economist Aditi Nayar pointed out that core-WPI (excluding food articles) returned to positive territory for the first time in 14 months, contributing significantly to the overall inflation rise. However, she expects some moderation in WPI inflation for June because of a recent retreat in global commodity prices.
Suman Chowdhury, chief economist at Acuité Ratings, expects a continued upward trend in WPI throughout the year, potentially impacting retail inflation in the coming quarters.
