Wholesale inflation rises to 2.61% in May; highest in 15 months

Wholesale inflation in India surged for the third consecutive month in May, reaching 2.61%, primarily due to rising prices of food articles and manufactured items. This marks a significant increase from the 1.26% recorded in April and a stark contrast to the negative inflation rate of -3.61% seen in May 2023.

Wholesale inflation surges

The Ministry of Commerce & Industry attributed the positive rate of inflation in May 2024 to several factors, including higher prices of food articles, manufactured food products, crude petroleum and natural gas, mineral oils, and other manufactured goods.

Data revealed that food article inflation jumped to 9.82% in May from 7.74% in April, with vegetable inflation surging to 32.42% from 23.60% the previous month. Notably, onion prices soared by 58.05%, while potatoes saw an inflation rate of 64.05%. Pulses also experienced a significant inflation increase, rising to 21.95% in May.

In the fuel and power sector, inflation slightly decreased to 1.35% in May from 1.38% in April. However, manufactured products saw a notable rise in inflation, reaching 0.78% compared to -0.42% in the previous month.

The rise in wholesale prices contrasts sharply with the retail inflation data for the same period. Retail inflation eased to a one-year low of 4.75% in May, as reported earlier in the week. The Reserve Bank of India (RBI), which primarily considers retail inflation when setting monetary policy, had kept the interest rate unchanged for the eighth consecutive time earlier this month.

This disparity between wholesale and retail inflation highlights differing inflationary pressures in the economy. While wholesale prices are climbing due to higher costs in food and manufacturing sectors, retail inflation remains subdued, influencing the RBI's cautious stance on interest rates. The ongoing rise in wholesale prices may impact future policy decisions if the trend continues.

Also watch: India's retail inflation eases to 4.75% in May; food inflation rises to 8.69%