Wholesale inflation flared up to a 30-year high of 15.88 per cent in May, stoked by rising crude prices and a falling rupee while a searing heat wave checked local supplies, raising the spectre of more interest rate hikes by the Reserve Bank of India (RBI).

The inflation rate, based on the wholesale price index (WPI), has been on an upward trajectory for the third month in a row and remained in the double digits for the 14th consecutive month since April 2021. It was at 15.08 per cent in April and 13.11 per cent in May last year.

“The sustained pressure on wholesale inflation due to rising input costs which is being passed on into the output prices continues unabated, and that is why despite a high base, the WPI inflation scaled to a fresh high (in the 2011-12 series) of 15.88 per cent. It is historically at the highest level since September 1991 (16.31 per cent),” Sunil Kumar Sinha, senior director and principal economist, India Ratings and Research, said.

Inflation in food items at 12.34 per cent crossed the double-digit mark after a gap of four months led by vegetables, potato and wheat. The last time it recorded the double-digit print was January at 10.40 per cent.

Aditi Nayar, chief economist at Icra, said given the weight of oil and fuel items in the WPI basket, the rise in global crude oil prices is expected to put upward pressure on the headline WPI print for June 2022.

Further, the weakening of the rupee against the dollar is likely to augment the landed cost of imports in the month, posing upside risks to the headline number. “Consequently, we expect WPI inflation to remain elevated at 15-16 per cent in June 2022.”

D.K. Srivastava, chief policy advisor, EY India, said the high wholesale inflation signalled continued upward pressure on CPI inflation in the next few months. The inflation is driven mainly by two commodity groups, primary articles which include food items as well as crude and fuel, and power which includes electricity and mineral oils.

“Measures announced by the government during the latter half of May to reduce input costs coupled with signs of moderation in global metal prices indices in May would bode well for WPI inflation . Soaring vegetable prices and elevated crude oil prices are likely to keep wholesale inflation in double digits,” Rajani Sinha, chief economist, CareEdge, said.

The central bank, last week, also raised the inflation projection by 100 basis points to 6.7 per cent for 2022-23.