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India Wholesale Inflation Hits 14-Month High In May

Wholesale price of potatoes has risen more than 80 percent from last year.

An employee and a customer handle Indian Rupee banknotes at an Indraprastha Gas Ltd. gas station in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)
An employee and a customer handle Indian Rupee banknotes at an Indraprastha Gas Ltd. gas station in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

India's wholesale price-based inflation rose to its highest level in more than a year last month due to a steep surge in fuel prices, surpassing street estimates.

Inflation, measured by the Wholesale Price Index, stood at 4.43 percent in May, according to a Ministry of Commerce and Industry release. A Bloomberg poll of economists had estimated it to be around 4 percent. The WPI in April stood at 3.18 percent. May's wholesale inflation is the highest since March 2017 when it had touched 5.11 percent.

The rise in inflation is because of an 11.22 percent rise in fuel prices from last year. Price of food articles rose 1.6 percent, with two staple vegetables in Indian kitchens-- potatoes and onions--costing 82 percent and 13.2 percent more, respectively, than they were a year ago.

The Reserve Bank of India’s six-member Monetary Policy Committee raised the repo rate to 6.25 percent in its meeting earlier this month and maintained a neutral stance, saying higher crude oil and housing prices is pushing up inflation. The MPC added that the “significant rise” in household inflation expectations could feed into wages and input costs.

Higher crude oil prices also led to retail inflation rising to 4.87 percent in May.

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Prices of petrol and diesel hit record highs after oil marketing companies hiked rates by close to 4 percent for both the fuels over a period of 16 days since May 14, when they resumed daily price revisions after a 19-day freeze in the run-up to the Karnataka elections. The prices have now been partially reduced over the last two weeks.

Here are the other key highlights from May WPI inflation commentary:

  • Price of primary articles rose 3.16 percent year-on-year
  • Price of food articles rose 1.6 percent
  • Price of fuel and power rose 11.22 percent
  • Price of manufactured products rose 3.73 percent
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