Higher prices of almost all products pushed producers’ inflation based on the Wholesale Price Index (WPI) to a 15-month high of 2.6 per cent in May, as against 1.3 per cent in April. This trend is contrary to retail inflation derived from the Consumer Price Index (CPI), which recorded a 12-month low of 4.75 per cent in May, as against 4.8 per cent in April.

“Positive rate of inflation in May 2024 is primarily due to increase in prices of food articles, manufacture of food products, crude petroleum & natural gas, mineral oils, other manufacturing etc,” a statement from the Commerce & Industry Ministry said. WPI is more important from an academic point of view and indicates output initial prices. All the policy decisions are based on CPI.

As per the data, inflation in food articles rose 9.82 per cent in May, as against 7.74 per cent in April. Inflation in vegetables was 32.42 per cent in May, up from 23.60 per cent in the previous month. Onion inflation was 58.05 per cent, while potato was 64.05 per cent. Pulses inflation rose 21.95 per cent in May. In the fuel and power basket, inflation stood at 1.35 per cent, marginally lower than 1.38 per cent in April. In manufactured products, inflation was at 0.78 per cent, higher than (-) 0.42 per cent in April.

Commenting on the latest print, Aditi Nayar, Chief Economist with ICRA, said the core-WPI (non-food manufacturing WPI) reverted to the inflationary territory in May after a gap of 14 months; this alone contributed as much as 57 bps to the 130-basis points uptick in the headline print compared to April.

The progress of the Southwest Monsoon has been quite uneven so far up to June 13, 2024, with excess rainfall in the Southern region, and a deficient rainfall in Northwest and East and Northeast India, amid heatwave conditions in these regions. Well distributed rainfall would be crucial to support the timely onset of kharif sowing across states, as well as replenish the reservoir levels, which are essential to keep a check on food inflation. In addition, MSPs for the kharif crops are awaited, which would also influence the sowing trends.

“Global commodity prices, including those for the Indian basket of crude oil have also retreated on a MoM basis in June 2024 so far. This would help contain the uptick in the YoY WPI inflation print in the month, countering the adverse base. Overall, ICRA expects the headline WPI inflation to inch up modestly to 3 per cent in June (-4.2 per cent in June 2023),” she said.

According to Sanjeev Agrawal, President of PHD Chamber of Commerce and Industry, going ahead, “inflation in the food articles is expected to rationalize by September/October 2024 as many of the kharif crops will be entering the mandis and supplementing the existing supply on the back of government strengthening the supply chains and expectation of above normal southwest monsoon.”