India, June 15 : India’s wholesale inflation rose sharply to 9.68 per cent in May under the newly revised Wholesale Price Index (WPI) series, reflecting persistent pressure from elevated food and energy costs amid geopolitical tensions in the Middle East. The latest data comes as the government rolled out a revamped inflation tracking framework that includes an updated WPI and the introduction of a Producer Price Index (PPI), signalling a significant modernization of India’s economic statistics system.
The increase in wholesale inflation follows a reading of 8.3 per cent in April under the previous WPI series and highlights the growing impact of global commodity price volatility on the domestic economy. Rising crude oil prices, driven by the ongoing conflict involving the United States and Iran, have pushed transportation and production costs higher, adding to inflationary pressures across multiple sectors.
According to official data, wholesale food inflation stood at 4.49 per cent in May, while the fuel and power category recorded a steep increase of 30.33 per cent. The surge in energy costs has emerged as a major contributor to overall price growth, affecting industries that depend heavily on fuel and electricity inputs.
The government on Monday launched a new WPI series with the base year revised from 2011-12 to 2022-23. The updated index significantly expands commodity coverage from 697 items to 957, providing a broader representation of India’s evolving production landscape. Officials said the revision aims to improve the accuracy and relevance of inflation measurement in line with current economic realities.
A major feature of the new framework is the introduction of the Producer Price Index, a long-awaited reform that economists have advocated for more than two decades. Unlike the WPI, which measures price movements only for goods, the PPI will also capture inflation in the services sector, offering policymakers a more comprehensive view of cost trends across the economy.
The revised WPI reflects changes in India’s energy ecosystem by incorporating renewable power sources such as solar and wind energy, along with nuclear generated electricity. In another key modification, crude oil and natural gas have been shifted from the primary articles category to the fuel and power group, allowing for a more accurate assessment of energy-related price movements.
Officials noted that the weighting methodology has also undergone a substantial revision. The new index assigns weights based on Gross Value of Output (GVO) rather than net traded value, ensuring that the economic significance of commodities is measured from a producer’s perspective. The change is expected to improve the reliability of inflation estimates and strengthen policy analysis.
The government has additionally adopted a chain-based short-term formulation method for the new WPI. This replaces the earlier long-term approach and aligns India’s inflation measurement practices more closely with international statistical standards. To maintain continuity between the old and new series, authorities have introduced a linking factor based on the geometric mean of fiscal year 2024-25 indices, enabling meaningful comparisons during the transition phase.
The overhaul comes at a time when inflation management remains a key concern for policymakers. Earlier this month, retail inflation accelerated to 3.93 per cent in May as food and fuel costs remained elevated. The Reserve Bank of India subsequently revised its inflation outlook upward for fiscal year 2026-27, citing growing uncertainty in global energy markets and persistent supply-side challenges.
The central bank now expects consumer price inflation to average 5.1 per cent during FY27, compared with its previous estimate of 4.6 per cent. The upward revision indicates that policymakers remain cautious about the inflationary consequences of geopolitical disruptions and higher commodity prices.
The newly introduced Producer Price Index will initially cover seven major service sectors, including banking, insurance, securities transactions, pension fund management, railways, air passenger transportation and telecommunications. Service-sector PPI data will be released quarterly and is expected to provide deeper insights into inflation trends within India’s expanding services economy.
Economists believe the transition towards the PPI framework will improve economic policymaking by offering a clearer picture of industry-level price movements. The broader index is also expected to assist businesses in pricing decisions and support more accurate calculations of real economic growth.
The government plans to gradually move from the WPI to the PPI over the next five years, depending on the effectiveness and acceptance of the new system. As India continues to modernize its statistical infrastructure, the latest reforms are expected to enhance transparency, strengthen economic analysis and bring the country’s inflation measurement practices closer to global benchmarks.
With energy markets remaining volatile and inflation risks continuing to evolve, the success of the new framework will play an important role in shaping future monetary and fiscal policy decisions.