New Delhi: Inflation based on the Wholesale Price Index rose to a record high of 12.94 percent in May on rising in wholesale prices of crude oil and manufactured goods. The buoyancy is also reflected in the comparative base as WPI-based inflation was down to minus 3.37 percent in May 2020. This is the fifth consecutive month that inflation based on the Wholesale Price Index (WPI) has risen. In April 2021, this tax was increased to 10.49 percent at the limit of 10 percent.
“The annual rate of inflation based on monthly WPI has increased to 12.94 percent in May 2021 (as compared to May 2020), down from minus 3.37 percent in May 2020,” the commerce ministry said in a statement. “The higher rate of inflation in May 2021 is mainly due to lower base effect and increase in the prices of petroleum products and manufactured products like petrol, diesel, naphtha, furnace oil, etc. as compared to the corresponding month of last year,” the statement said. “
Wholesale inflation in the fuel and power segment rose to 37.61 percent during the period under review, as against 20.94 percent in April. Inflation in manufactured products stood at 10.83 percent in May as against 9.01 percent in the previous month. Food inflation eased marginally to 4.31 percent in May. However, onions became expensive during this period. Onion prices were up 23.24 percent year-on-year in May. Its wholesale prices in April were 19.72 percent lower than a year ago.
ICRA Chief Economist Aditi Nair said core WPI inflation (manufactured non-food products) rose sharply in May 2021, with most sub-sectors witnessing an increase in wholesale prices. “Continuous rise in global crude oil prices, weak rupee, and rise in domestic fuel prices continue to be risk factors for WPI in the times to come,” he said. However, we expect WPI inflation to moderate slightly to 11.9-12.3 percent in June 2021 with the base effect easing.”
The RBI in its monetary policy earlier this month kept interest rates at a record low and said it was committed to maintaining a lenient policy to boost growth.
