WPI based inflation hits an all-time high of 12.94% in May

In May 2021, the wholesale price index (WPI) based inflation hit an all-time high of 12.94 percent as the prices of crude petroleum, mineral oils and manufactured products continue to rise.

The Ministry of Commerce and Industry said, “The high rate of inflation in May 2021 is primarily due to low base effect and rise in prices of crude petroleum, mineral oils viz. petrol, diesel, naphtha, furnace oil, etc. and manufactured products as compared to the corresponding month of the previous year.”

The rate of inflation in April 2021 was 10.49 percent, which was a eleven-year high. May is the fifth consecutive month when WPI has experienced an uptick.

For May 2021, the manufactured products inflation increased to 10.8 percent as compared to 9 percent last month. The core inflation rate rose to 10 percent against 8.3 percent in the previous month. Fuel and power inflation rose by 37.6 percent during May.

Moreover, even low base index has led the WPI inflation soar. In May 2020, the inflation rate was (-) 3.37 percent.

The inflation rate in food articles have eased in May 2021 marginally to 4.31 percent. In onions, the rate was 23.24 percent in comparison to (-) 19.72 percent in the month of April.

“The sharp rise in WPI inflation in May 2021 is not a surprise as it reflects rising global commodity prices including metal and energy prices. While domestic demand situation in India remains markedly weak, prices of such commodities typically are strongly influenced by global prices and, thus, will not likely soften in a hurry”, added Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank.

Earlier this month, the Reserve Bank of India (RBI) in its monetary policy has not changed the interest rates at record lows. It is committed to maintain an accommodative policy stance for growth.

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