Wholesale food prices surged in May, with official data indicating the Whole Price Index for food increasing from 5.52 percent in April to 7.40 percent in May.
This spike affected a range of food items, including cereals, paddy, pulses, vegetables, potatoes, onions, and fruits.
Overall, India's wholesale inflation, based on the Wholesale Price Index (WPI), rose to 2.61 percent in May from 1.26 percent in April, as reported by the Commerce Ministry.
This marks the seventh consecutive month of positive inflation after a seven-month period of negative inflation ending in October. Increased prices of food articles and minerals primarily drove the high wholesale inflation rate in April. In May, inflation was further propelled by rising prices in the manufacturing sector, particularly in food products, crude petroleum and natural gas, mineral oils, and other manufactured goods.
Economists often argue that a moderate rise in wholesale inflation can be beneficial as it incentivizes manufacturers to increase production. Sanjeev Agrawal, President of the PHD Chamber of Commerce and Industry, noted that food article inflation is expected to stabilize by September/October 2024. This expectation is based on the arrival of kharif crops in the markets, government efforts to strengthen supply chains, and the forecast of an above-normal southwest monsoon.
In April of the previous year, wholesale inflation turned negative, similar to the initial period of the COVID-19 pandemic in July 2020. Wholesale inflation was 8.39 percent in October 2022 and has been declining since then. Notably, WPI-based inflation had remained in double digits for 18 consecutive months until September 2022.
The government releases monthly index numbers of wholesale prices on the 14th (or the next working day), compiled from data received from institutional sources and selected manufacturing units nationwide.
Meanwhile, India's retail inflation rate slightly eased in May, continuing its moderation trend, although food prices remain a significant concern for policymakers. Annual retail inflation in May hit a 12-month low of 4.75 percent, down from 4.83 percent in April.
