Wholesale inflation jumps to 9.68% on war-driven fuel surge

The Commerce and Industry Ministry on Monday released the WPI-based inflation data revising the base year to 2022-23, from 2011-12 earlier.

Fuel and power inflation, measured by the Wholesale Price Index, increased from 24.89 per cent in April to 30.33 per cent in May. Inflation for crude petroleum was 61.51 per cent in May compared to 56.31 per cent the month prior.

The implications of the West Asia crisis and an effective blockade of the Strait of Hormuz, which is where mainly crude oil is imported into India, are reflected in the rapid increase in WPI inflation, which has a knock-on effect on food prices.

In May, food product inflation was 3.60 per cent, up from 2.43 per cent in April. According to figures, inflation in manufactured goods increased from 6.68 per cent in April to 7.48 per cent in May.

Retail or consumer price index-based inflation also reached a 16-month high of 3.93 per cent in May, up from 3.48 per cent the month before.

Saurabh Sanyal, Secretary General, ASSOCHAM, said the high inflation was short-lived, as it was mainly caused by the prices of petroleum products and other international commodities.

“As the USA and Iran are in a peace deal, and international crude oil prices have corrected significantly to the level of $83 per barrel in the international market and are expected to decrease further, the positive impact on the inflation trajectory is expected in the coming months,” said Sanyal.

Meanwhile, the government has directed the Reserve Bank of India (RBI), which primarily considers CPI when determining its monetary policy, to ensure that headline inflation stays at 4 per cent with a 2 per cent buffer on each side.

The RBI increased its inflation forecast for the current fiscal year earlier this month from 4.6 per cent to 5.1 per cent. This increase was primarily driven by rising input costs, which are a result of higher global energy prices being passed through to retail petrol and diesel prices.

In the second part of May, petrol and diesel prices increased by Rs 7.50 per litre due to rising global crude oil prices.