India's wholesale inflation stood at 9.68% in May under a new series, while food and fuel prices stayed at elevated levels amid the continuing Middle East tensions due to the US-Iran war that inflated global crude prices and strained supply chains.
India's wholesale inflation had accelerated to a 42-month high of 8.26% in April under the old series. A Reuters poll of economists had forecast a 9.05% annual increase in wholesale prices for May.
India's wholesale food prices stood at 4.49% in May while fuel and power prices surged 30.33% in May.
The food index was at 3.11% in April and fuel and power wholesale inflation was at 24.89%, according to the latest release.
Inflation in crude petroleum and natural gas shot up 61.51%.
India's state-run fuel retailers raised fuel prices four times in May, lifting transport costs. A sustained rise in energy prices could widen India's current-account deficit, weigh on the rupee and add to inflationary pressures in the world's third-largest oil importer. A below-normal monsoon, meanwhile, risks lifting food prices later this year, complicating the inflation outlook.
"The surge underscores India’s exposure to external energy price shocks, with global crude markets continuing to be driven by geopolitical tensions. Going forward, the overall impact will largely depend on the trajectory of oil prices amid the evolving geopolitical situation," said Shashwat Singh, Fundamental Analyst, Bajaj Broking.
Higher energy costs also pushed up prices at the factory gate.
Inflation in manufactured products accelerated to 7.48% in May, driven by rising prices of chemicals, textiles, machinery and basic metals. Inflation in basic metals climbed to 12.3%, while chemicals and chemical products recorded inflation of 13.4% in May. Wholesale inflation in textile manufacturing surged 10.22%.
On Monday, the government also launched a new producer price index (PPI) series and unveiled a wholesale price index (WPI) with an updated base year, in a significant overhaul of its inflation tracking framework. The base year for the WPI has been revised from 2011-12 to 2022-23 and expands the number of commodities covered to 957 from 697.
India relies on the WPI as a key gauge of producer-level inflation. However, the introduction of the PPI aligns India more closely with global statistical standards and, over time, will help policymakers better adjust economic growth data for inflation. Efforts to replace the WPI with a PPI have been under discussion for more than two decades.
Last week, India's retail inflation accelerated to 3.93% in May as food and fuel prices firmed amid the escalating conflict in West Asia. The RBI during its monetary policy meeting last week had raised its FY27 inflation forecast, signalling mounting price pressures from higher food costs and a recent pickup in consumer inflation amid the escalating conflict in West Asia. The central bank now expects consumer price inflation to average 5.1% in FY27, up from the 4.6% projection in its April policy review.
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What is new in India's WPI new series
The revised WPI series broadens coverage of 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 also been moved from the primary articles category to the fuel and power group, creating a more comprehensive measure of energy prices.
The government has updated the index's methodology, with weights now based on Gross Value of Output (GVO) rather than net traded value. Officials said the change better captures the economic importance of commodities from a producer's perspective.
The overhaul is part of a broader effort to modernise India's statistical framework. In recent months, authorities have updated the base years for key indicators including GDP, consumer inflation and industrial production to better reflect current economic activity and consumption patterns.
The new WPI series also adopts a chain-based short-term formulation method, replacing the long-term approach used previously and bringing the index closer to global statistical standards. To ensure continuity, the government has introduced a linking factor based on the geometric mean of FY25 indices, allowing comparisons between the old and new WPI series across commodities and major groups during the transition period.
Also Read: India overhauls inflation framework with new Producer Price Index, revised WPI
Transition from WPI to PPI
"In line with the WPI inflation, the output PPI increased to 9.4% in May 2026 from 8.1% in April. Most heads of services PPI remained benign in Q4 FY26, reflecting the fact that the current surge in inflationary pressures is supply driven and not demand driven. Overall, the introduction of the output PPI, trial input PPI, and the services PPI is a positive step towards aligning the domestic price indices with the global practices," said Rajani Sinha, Chief Economist, CareEdge Ratings.
Unlike the WPI, which tracks only goods, the new PPI will also cover services. The index will include measures of input costs, output prices and service-sector inflation, initially covering seven services: banking, securities transactions, insurance, pension fund management, railways, air passenger transport and telecommunications.
The government plans to gradually shift from WPI to PPI over the next five years, although the timeline will depend on the performance of the new indices. Service-sector PPI data is expected to be released quarterly. Economists say the broader index will provide a clearer picture of industry-specific inflation, help businesses make pricing decisions and support more targeted economic policymaking.
