India’s annual wholesale prices fell for the second consecutive month in May on easing input costs brought about by lower commodity prices, government data showed on Wednesday. The wholesale price index (WPI) fell 3.48%, compared with a 2.35% fall estimated by economists in a Reuters poll. It fell 0.92% in April. The WPI is an essential measure of pipeline price pressures, tracking the cost of goods and services wholesale businesses buy from producers and trade in bulk to retail customers. It excludes taxes and transport costs.
Lower prices of mineral oils, primary metals, food products, textiles, non-food articles, and crude petroleum & natural gas led to a decline in wholesale inflation in May. Inflation in the primary articles, manufactured, and fuel & power categories also fell.
Manufactured product prices declined 2.97% in May. Lower prices of primary metals, chemicals, paper, and plastics drove the decline. Inflation in the fuel and power category eased to 0.93 percent, mainly due to lower prices of LPG and kerosene.
Inflation in the food index declined by 1.71%, mainly reflecting a sharp fall in the prices of onions and potatoes. Prices of vegetables and meat also recorded a sharp decline. Food and fuel inflation has declined for several months, in line with the government’s aim to reduce consumer prices.
The annual core inflation rate- excluding food, fuel, and energy – declined to 3.07% in May, the lowest since October 2021. It was also below the central bank’s target of 4%.
According to economists, core inflation is expected to remain subdued in the near term, mainly on lower crude oil and wheat prices. “As a result, the inflationary pressure on the domestic economy is likely to remain contained,” said Rupa Rege Nitsure, an economist with the state-run Bank of Baroda.
But inflationary pressure could build up later in the year if global commodity prices resume their upward trend and a severe El Nino impact on agriculture production and food prices persists, experts say.
The lower wholesale and core inflation will allow the Reserve Bank of India to keep its key repo rate steady at 6.5%. The RBI is widely expected to maintain its status quo at Thursday’s policy review meeting. Signs of easing inflation will provide the central bank more breathing room to cut interest rates if needed to spur economic growth. The data comes a day after retail inflation eased to a two-year low in May, helped by easing food and fuel prices.
