New Delhi

India's wholesale price inflation accelerated sharply to a record 9.68 per cent in May, up from 8.26 per cent in April, driven primarily by soaring fuel and power costs amid energy disruptions linked to the conflict in West Asia.

The May reading is the highest since the introduction of the revised Wholesale Price Index (WPI) series with 2022-23 as the base year, according to data released by the Commerce and Industry Ministry on Monday.

Fuel costs drive inflation spike

The ministry attributed the surge largely to higher prices of:

• Mineral oil and petroleum products,
• Crude petroleum and natural gas,
• Chemicals and chemical products, and
• Basic metals.

The fuel and power category, which now carries a weight of 14.1 per cent in the revised WPI basket, recorded inflation of 30.33 per cent in May compared with 24.89 per cent in April.

Inflation in crude petroleum and natural gas climbed to 61.51 per cent, up from 56.31 per cent a month earlier.

The sharp increase reflected the fallout of the West Asia conflict and disruptions around the Strait of Hormuz, a critical route through which a significant portion of India's crude oil imports pass.

Food and manufacturing inflation also rise

The inflationary pressures were not confined to energy.

• Food articles inflation: 3.60 per cent in May, compared with 2.43 per cent in April.
• Manufactured products inflation: 7.48 per cent, up from 6.68 per cent.

Economists noted that higher fuel costs have gradually filtered into other sectors of the economy.

Government revises inflation framework

The release marked the first revision of the WPI base year in nine years.

Key changes include:

• Base year revised from 2011-12 to 2022-23.
• Total items in the WPI basket increased from 697 to 957.
• New energy sources such as solar, wind, and nuclear electricity added to the index.

The government also released Producer Price Indices (PPI) for the first time, covering both input and output prices.

Service-sector PPIs were introduced for seven sectors:

• Banking,
• Securities transactions,
• Pension fund management,
• Insurance,
• Railways,
• Air passenger services, and
• Telecommunications.

The ministry indicated that India plans to gradually phase out WPI over the next five years and transition towards PPI, aligning with international best practices.

Experts see some relief ahead

ICRA Principal Economist Rahul Agrawal said easing geopolitical tensions and softer commodity prices could moderate wholesale inflation in June.

India Ratings and Research Director Megha Arora projected WPI inflation to ease slightly to around 9.3 per cent in June.

However, she cautioned that a return to pre-conflict levels would take time.

"The 2026 monsoon is under the shadow of El Nino, and would keep food prices elevated in the near term. Inflation based on WPI is expected to remain higher than CPI due to the larger weight of fuels," Arora said.

WPI remains well above retail inflation

Wholesale inflation continued to outpace consumer inflation for the second straight month.

• Retail inflation (CPI): 3.93 per cent in May.
• Wholesale inflation (WPI): 9.68 per cent in May.

The Reserve Bank of India primarily targets CPI inflation and is mandated to keep it at 4 per cent, with a tolerance band of two percentage points on either side.

Earlier this month, the RBI raised its inflation forecast for the current financial year to 5.1 per cent, from 4.6 per cent, citing rising input costs stemming from elevated global energy prices.

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The pressure was also reflected in domestic fuel markets, with petrol and diesel prices increasing by Rs 7.50 per litre during the second half of May.