India's wholesale price inflation accelerated to 9.68% year-on-year in May, government figures released on Monday show, as an energy shock tied to the conflict in the Middle East continued to push up costs at the producer level.
The wholesale measure, which gives greater weight to fuel-related products, is running substantially above the country's consumer price inflation, which was recorded at 3.93% in May. Despite the divergence, economists polled by Reuters said the sharp rise in wholesale prices is not likely to translate into an immediate tightening of monetary policy.
The Reserve Bank of India, which targets 4% retail inflation within a tolerance band of 2% to 6%, left policy rates unchanged at its June meeting and signalled it will monitor any second-round effects from rising fuel prices before deciding on further action. Economists in the Reuters poll had expected wholesale inflation to come in at 9.05%.
May's reading marked an increase from April's 8.26% and, under the revised series with a base year of 2022-23, represented the fastest pace in six months on comparable government-calculated numbers.
Wholesale fuel and power prices surged 30.33% year-on-year in May, up from a 24.89% rise in April, the data showed. Within that category, petroleum and natural gas prices climbed 61.51% in May. The government data noted that crude prices have risen 27% since the U.S.-Israeli war on Iran broke out in late February, a development that contributed to state-run oil marketing companies increasing retail fuel prices four times in May.
There are signs of some easing in global energy markets following diplomatic movement. The United States and Iran agreed on a framework to end their war, halt the U.S. blockade of Iran and reopen the Strait of Hormuz, a preliminary pact that prompted a decline in global oil prices.
"The recent cooling in global energy and commodity prices after the easing of tensions in the West Asia is expected to provide respite to the WPI inflation print for June 2026," Rahul Agrawal, principal economist at rating agency ICRA, said.
Breaking down other categories, wholesale food prices rose 3.60% year-on-year in May, up from a 2.43% increase in April. Prices of manufactured products expanded 7.48% in May compared with a 6.68% rise the previous month.
The May release also introduced a set of new producer price indicators. The suite includes an output producer price index, a trial input PPI and a services PPI that covers seven sectors: banking, securities transactions, pension fund management, insurance, railways, air passenger transport and telecommunications. Based on Reuters' calculation, producer prices in May rose 9.38%.
Policymakers and market participants will be watching subsequent prints for evidence of persistent pass-through from wholesale to retail inflation and for any implications for interest rate decisions. For now, the central bank's decision to pause suggests it will await clearer signs of second-round effects before taking further action.