The WPI food index increased from 5.52 percent in April to 7.40 percent in May

Ronit Kawale
Ronit Kawale - Senior Editor
4 Min Read

Wholesale food prices skyrocketed month-on-month in May. Official data show that the overall price index for food items rose from 5.52 per cent in April to 7.40 per cent in May.

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Among food grains, prices of cereals, paddy, pulses, vegetables, potatoes, onion and fruits increased.

The overall wholesale inflation in India, based on the Wholesale Price Index, rose to 2.61 per cent in May as against 1.26 per cent in April, according to official data from the Commerce Ministry.

Thus, it remained in the positive territory for the seventh month after remaining in the negative territory for seven months till October. The high rate of wholesale inflation in April was mainly due to the rise in prices of food items and minerals

Besides, prices of food products, crude petroleum and natural gas, mineral oils and other manufactured goods increased in May.

Economists often say that a small increase in wholesale inflation is good, because it usually encourages goods manufacturers to produce more.

“Going forward, inflation in food articles is expected to rationalise by September/October 2024 as several kharif crops enter the mandis and supplement existing supplies due to strengthening of supply chains by the government and an expected above-normal southwest monsoon,” said Sanjeev Aggarwal, president, PHD Chamber of Commerce and Industry.

The wholesale inflation rate had turned negative in April last year. Similarly, in the initial days of Covid-19, the wholesale inflation rate was recorded negative in July 2020.

The overall wholesale inflation was 8.39 per cent in October 2022 and has declined since then. It is noteworthy that the Wholesale Price Index (WPI) based inflation had remained in double digits for 18 consecutive months till September 2022.

The government releases the Wholesale Price Index on a monthly basis on the 14th of every month (or next working day). The index numbers are compiled based on data received from institutional sources and selected manufacturing units across the country.

Meanwhile, India's retail inflation rate eased marginally in May, continuing an easing trend, though food prices remain a concern for policymakers. Annual retail inflation stood at a 12-month low of 4.75 per cent in May, marginally lower than 4.83 per cent in April. Retail inflation, or the consumer price index, stood at 5.7 per cent in December last year, and has been moderating since then.

Retail inflation in India, though at the RBI’s comfortable level of 2-6 per cent, remains above the ideal 4 per cent scenario, and food inflation in particular is a matter of concern.

Except for the recent pause, the RBI has raised the repo rate by 250 basis points to 6.5 percent since May 2022 in the fight against inflation. Raising interest rates is a monetary policy tool that typically helps suppress demand in the economy, leading to a drop in the inflation rate.

Going forward, food price uncertainties will continue to weigh on the inflation outlook. Food price pressures are constraining India's ongoing inflation recovery, and posing challenges to achieving the ultimate inflation target of 4 percent.

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