US-Iran war impact: Reflecting the impact of the US-Iran conflict, the Wholesale Price Index (WPI) inflation for the month of May rose sharply to 9.68% from 8.26% in April. This is the first WPI data under the revised base year series released by the government.The Commerce and Industry Ministry on Monday released the latest Wholesale Price Index data based on a revised base year of 2022-23, replacing the earlier 2011-12 series.Wholesale inflation accelerated as higher prices of fuel, power, manufactured goods and food items pushed up input costs across the economy.
Breaking down rise in WPI numbers
Price pressures in the fuel and power segment intensified significantly. Inflation in this category rose to 30.33% in May from 24.89% a month earlier. Crude petroleum prices were a major contributor, with inflation in the segment increasing to 61.51%, compared with 56.31% in April.The surge in wholesale inflation underscored the economic impact of the West Asia conflict and the disruption of shipping through the Strait of Hormuz, a key route for India’s crude oil imports. Higher energy costs also filtered through to food prices, adding to broader inflationary pressures.Food article inflation increased to 3.60% in May from 2.43% in the previous month. Meanwhile, inflation in manufactured products climbed to 7.48%, up from 6.68% in April, according to official data.Retail inflation, measured by the Consumer Price Index (CPI), also moved higher during the month, reaching a 16-month peak of 3.93%, compared with 3.48% in April.The Reserve Bank of India, which primarily relies on CPI inflation while setting monetary policy, is tasked with maintaining headline inflation at 4%, with a tolerance band of 2 percentage points on either side.Earlier this month, the central bank raised its inflation forecast for the current financial year to 5.1% from 4.6%, citing rising input costs and the transmission of elevated global energy prices into domestic fuel rates.Global crude oil strength had already translated into higher retail fuel costs, with petrol and diesel prices increasing by Rs 7.50 per litre during the latter half of May.
