Economy / India's WPI inflation hits all-time high at 12.94% in May

New Delhi: The wholesale price-based inflation hit an all-time high of 12.49% in May. It stood at 10.49% in April. This is the fifth straight month of an uptick in the WPI inflation. Low base effect also contributed to the spike in WPI inflation in May 2021. In May 2020, WPI inflation was at (-) 3.37 per cent.

This is the fifth straight month of uptick seen in the wholesale price index (WPI)-based inflation. In April, 2021, WPI inflation hit double digit at 10.49 per cent.

"The annual rate of inflation, based on monthly WPI, was 12.94 per cent for the month of May, 2021 (over May, 2020) as compared to (-) 3.37 per cent in May 2020.

"The high rate of inflation in May 2021 is primarily due to low base effect and rise in prices of crude petroleum, mineral oils viz. petrol, diesel, naphtha, furnace oil etc. and manufactured products as compared to the corresponding month of the previous year," the Commerce and Industry Ministry said.

The manufactured products inflation rose to 10.8% as against 9% in the previous month, while core inflation jumped to 10% compared to 8.3% in April (2021). Fuel and power inflation jumped by 37.6%. Primary articles inflation surged by 9.6%. The crude oil and prices of other commodities have been pushed by global recovery

However, inflation in food articles eased marginally to 4.31 per cent in May, even as onion prices spiked. Inflation in onion stood at 23.24 per cent in May, against (-) 19.72 per cent in April.

Siddhartha Sanyal, Chief Economist and Head – Research, Bandhan Bank, said: "The sharp rise in WPI inflation in May 2021 is not a surprise as it reflects rising global commodity prices including metal and energy prices. While domestic demand situation in India remains markedly weak, prices of such commodities typically are strongly influenced by global prices and, thus, will not likely soften in a hurry."

"CPI inflation will likely stay elevated in the coming months as well and the RBI’s current CPI forecast of 5.1% during 2021-22 clearly faces material upside risks reflecting global commodity prices, a sharp rise in prices of petroleum products in India and continued supply disruptions," he added.

The RBI in its monetary policy earlier this month kept interest rates unchanged at record lows and committed to maintain an accommodative policy stance to support growth.

RBI pegged retail inflation at 5.1 per cent in this fiscal ending March 2022, with upside risks from higher commodity prices and re-emergence of higher supply constraints amidst the current phase of lockdowns.