Wholesale price inflation surged to a record high of 15.88% in May

The wholesale price-based inflation, based on the Wholesale Price Index (WPI), surged to 15.88% in May. This is the highest on record under the current WPI series launched in 2012.

The wholesale inflation has remained in double-digits since the start of the financial year 2021-22. The increase follows close on the back of the retail inflation for May which was recorded at 7.04%. "The high rate of wholesale inflation in May 2022 is primarily due to rise in prices of mineral oils, crude petroleum & natural gas, food articles, basic metals, non-food articles, chemicals & chemical products and food products etc. as compared to the corresponding month of the previous year," the government press release said.

The RBI had hiked the repo rate by 50 bps to 4.90% in its bi-monthly policy meet earlier this month. This increase came close on the back of an unscheduled and surprise move on May 02, which announced a 40-basis-point hike in the benchmark policy repo rate. Policy analysts and economists believe that the interest rates could be raised by another 60 bps soon keeping in line with the measures taken by central banks globally to curb the inflationary pressures.

Crude petroleum increased by 78.7% in May. Petrol and LPG price-based inflation were higher at 58.8% and 47.7% respectively. Inflation in manufactured products, carrying the biggest weightage of 64.2% in the WPI increased by 10.1%. Within manufactured products, the wholesale prices of basic metals increased by 18.88%, paper & paper products by 15.99%, textiles by 14.86%, chemicals & chemical products by 13.94%, and vegetable & animal oils by 11.41% in May'22. Out of the 22 NIC two-digit groups for Manufactured products, 19 groups witnessed an increase in prices while 3 groups witnessed a decrease in prices in May.

Wholesale Food Inflation

WPI has a sub-index called Food Index (WFPI), which is a combination of the Food Articles from the Primary Articles basket, and the food products from the Manufactured Products basket. As a sub-index, it broadly constitutes 24.4% of the overall Wholesale Price Index.

The Wholesale Food Price Index increased to 10.89% in May'22 from 8.88% in Apr'22. Wholesale prices of vegetables were higher by 56.4%, fruits by 10% while the prices of wheat increased by 10.6%.

Reference Reading

What is wholesale inflation?

Wholesale inflation is based on the Wholesale Price Index (WPI) which measures the changes in the price of 697 goods sold and traded in bulk by wholesale businesses to other businesses. Analysts use the numbers to track the supply and demand dynamics in industry, manufacturing, and construction. An upward surge in the WPI print indicates inflationary pressure in the economy and vice versa. The quantum of rise in the WPI month after month is used to measure the level of wholesale inflation in the economy. The wholesale price basket is broadly grouped into Primary articles, Fuel & Power, and Manufactured Goods.

• Primary articles: It constitutes 22.6% of the overall Wholesale Price Index. It is further subdivided into Food Articles, Non-food articles, Minerals, and Crude Petroleum & Natural Gas
• Fuel & Power: It constitutes 13.2% of the overall Wholesale Price Index and tracks price movements in Petrol, Diesel, and LPG
• Manufactured products: This is the biggest component basket and carries a weightage of 64.2% in the overall WPI. It comprises of a variety of manufactured products such as Textiles, Apparels, Paper, Chemicals, Plastic, Cement, Metals, etc and Manufactured Goods such as Sugar, Tobacco Products, Vegetable and Animal Oils, etc.