India's wholesale inflation jumps to 9.68% in May
What's the story
India's wholesale inflation for May stood at a staggering 9.68%, according to a new series introduced by the government. The spike comes as food and fuel prices continue to remain high, largely due to the ongoing US-Iran war that has pushed global crude prices up and disrupted supply chains. Under the previous series, wholesale inflation had hit a 42-month high of 8.3% in April.
Policy change
Government introduces new producer price index (PPI) series
On Monday, the government unveiled a new producer price index (PPI) series and an updated wholesale price index (WPI). The base year for WPI has been changed from 2011-12 to 2022-23, covering 957 commodities as opposed to the previous 697. This move is part of a larger effort to modernize India's statistical framework and align it more closely with global standards.
Economic outlook
Retail inflation rises to 3.93% in May
Last week, India's retail inflation rose to 3.93% in May as food and fuel prices surged due to the intensifying West Asia conflict. The Reserve Bank of India (RBI) revised its FY27 inflation forecast upward during its monetary policy meeting, citing rising food costs and a recent uptick in consumer inflation as contributing factors. The central bank now expects consumer price inflation to average 5.1% in FY27, up from April's projection of 4.6%.
Index update
Changes in the revised WPI series
The revised WPI series also captures India's changing energy mix by including renewable sources such as solar and wind power, as well as nuclear electricity. Crude oil and natural gas have been moved from primary articles to the fuel and power group for a more comprehensive measure of energy prices. The government has also changed the index's methodology, with weights now based on Gross Value of Output (GVO) rather than net traded value.
Index expansion
New PPI will also cover services
Unlike the WPI, which only tracks goods, the new PPI will also cover services. It will measure input costs, output prices and service-sector inflation for seven services: banking, securities transactions, insurance, pension fund management railways air passenger transport and telecommunications. The government plans to transition from WPI to PPI over five years depending on how well these new indices perform.