Wholesale inflation surges to 9.68% in May on soaring energy prices

India’s wholesale price inflation under the revised 2022-23 base year accelerated to 9.68 per cent in May, the highest level in the available 37-month back-series data, driven largely by a sharp increase in energy prices following disruptions linked to the West Asia conflict, according to data released by the Ministry of Commerce and Industry on Monday.

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The government also released India’s first Goods Output Producer Price Index (PPI) under the same base year. The new index showed producer-level inflation at 9.38 per cent in May, compared with 8.06 per cent in April, indicating that price pressures at the producer level closely mirrored wholesale inflation trends.

Fuel inflation under the Wholesale Price Index (WPI) climbed to 30.33 per cent in May from 24.89 per cent in April, emerging as the biggest contributor to the rise in headline inflation.

Alongside the new WPI series, the ministry released a trial Input PPI for manufacturing and a Services PPI covering selected service sectors.

Among the four major output PPI groups, inflation stood at 4.58 per cent for agriculture, forestry and fishing, 18.97 per cent for mining and quarrying, 11.28 per cent for manufactured products, and negative 1.96 per cent for electricity.

The trial input PPI for manufacturing remained unchanged at 104.9 in May compared with April, but rose from 100.9 in March.

The ministry also introduced a quarterly Services PPI covering banking, securities transactions, insurance, pension fund management, railways, air passenger transport and telecommunications. For the fourth quarter of FY26, the banking services index stood highest at 129.7, while securities transactions recorded the lowest reading at 91.7.

“The rise in wholesale inflation reflects significant supply-side pressures, especially from energy markets,” said D K Srivastava, Chief Policy Advisor at EY India. He noted that the increase could widen the gap between nominal and real GDP growth during FY27.

“Although this may imply higher tax revenues for given levels of tax buoyancy, the Government of India may consider absorbing some of the inflation burden that would otherwise be passed on to producers and consumers. This issue may be particularly relevant while determining specific excise duty rates,” Srivastava said.

While fuel inflation accounted for a large share of the increase, inflationary pressures were broad-based across major components.

Primary articles inflation rose to 4.99 per cent in May from 3.78 per cent in April. Inflation in manufactured products, which carry a weight of 63.1 per cent in the WPI basket, increased to 7.48 per cent from 6.68 per cent.

Manufactured goods categories such as base metals, chemicals, textiles and electrical equipment registered inflation rates exceeding 10 per cent.

“This is significant because it indicates embedded cost pressures that are not necessarily linked only to crude oil,” said Madan Sabnavis, Chief Economist at Bank of Baroda.

The data also showed food inflation rising to a 16-month high of 4.49 per cent in May from 3.11 per cent in April.

Within the fuel and power segment, inflation in crude petroleum and natural gas accelerated to 61.51 per cent from 56.31 per cent. The index for crude petroleum and natural gas has risen sharply from 92.4 in February to 136.8 in May.

Mineral oils, including petrol, diesel and liquefied petroleum gas (LPG), recorded inflation of 49.82 per cent, reflecting supply disruptions and higher energy costs stemming from geopolitical tensions in West Asia.

Electricity inflation remained in negative territory at minus 1.85 per cent, although it improved from minus 2.68 per cent in April. The electricity component now includes renewable and alternative energy sources such as solar, wind and nuclear power.

Economists cautioned that food inflation risks remain elevated amid uncertainty surrounding the southwest monsoon.

India Ratings and Research (Ind-Ra) expects WPI inflation to ease slightly to 9.3 per cent in June, while Bank of Baroda projects inflation to remain in the 8–9 per cent range in the coming months, provided crude oil prices stabilise.

“Higher inflation in both WPI and CPI is likely to boost nominal GDP growth. Consequently, FY27 nominal GDP growth could exceed the assumptions built into this year’s Budget,” said Megha Arora, Director at Ind-Ra.