Wpiinflation hitsall-timehighof12.94%
Inflation surged after increase in prices of crude oil, fuel and manufactured goods
NEW DELHI: The wholesale price-based inflation accelerated to a record high of 12.94% in May, on rising prices of crude oil and manufactured goods.
Low base effect also contributed to the spike in WPI inflation in May 2021. In May 2020, WPI inflation was at (-) 3.37%.
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%.
“The annual rate of inflation, based on monthly WPI, was 12.94% for the month of May, 2021 (over May, 2020) as compared to (-) 3.37% 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.
Inflation in fuel and power basket spiked to 37.61% during May, against 20.94% in April. In manufactured products, inflation stood at 10.83% in May, against 9.01% in the previous month.
Crude petroleum price rose 102.5%, which led to increase in prices of LPG (61%), petrol (62.3%), and diesel (66.3%), especially as the government increased fuel prices post assembly election results. Among food items, inflation of pulses (12.1%), onions (23.2%) and fruits (20.2%) rose, while vegetable prices fell 9% from their level a year ago.
Among manufactured items, food products (15.2%), edible oil (51.7%), basic metals (27.6%) rose significantly, while prices of tobacco products contracted.
However, inflation in food articles eased marginally to 4.31% in May, even as onion prices spiked. Inflation in onion stood at 23.24% in May, against (-) 19.72% in April.
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% 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.
Retail inflation data for May is scheduled to be released later in the day.
As the commodity prices are hardening, the core WPI inflation is expected to rise further.
The core-wpi inflation (manufactured non food products) hardened sharply to a serieshigh 10% in May 2021, with a broad-based uptrend across most of the sub-sectors. The core-wpi inflation is expected to climb further to a new serieshigh 10.4-10.9% in June 2021, and sustain in double-digits until September 2021,” Aditi Nayar, Chief Economist, ICRA, said.
A global recovery has pushed crude oil and prices of other commodities upwards.
This is showing up in the domestic wholesale price index along with effects of supply-side bottlenecks due to the impact of local lockdowns in May.
“The continued rise in global crude oil prices, a weaker rupee and the upward revision in domestic fuel prices remain risk factors for the upcoming WPI print. However, we expect the headline WPI inflation to recede modestly to 11.9-12.3% in June 2021, as the base starts to normalise,” Nayar added.