Unlike retail inflation, WPI does not include services, which is witnessing lower inflation compared with goods. Fuel, which has remained high, has a much higher weight in WPI than in CPI, and economists expect the rising wholesale inflation to continue to maintain upward pressure on retail inflation.
Retail inflation eased to 7.04% in May from 7.79% in April while wholesale inflation quickened to 15.88% from 15.08%.
“The cut in fuel excise duty and the ban on wheat exports have reflected in lower retail inflation,” said Yuvika Singhal, economist at QuantEco Research.
While the CPI is heavily tilted towards food with 54.18% weight, the WPI has a huge weight of manufactured items at 64.2%.
The fuel component in CPI is 7.94% and is 13.2% in WPI.
“High oil prices in the international market have resulted in high and
inflation in the manufactured products and fuel & power categories of the WPI,” said a government official, adding that their high weights have resulted in the WPI inflation increasing for May.
Retail inflation in food cooled to 7.84% in May from 8.1% in the trailing month and in fuel & light category eased to 9.54% from 10.8% in April.
However, on the wholesale side, Fuel and Power inflation accelerated to 40.62% from 38.66%.
As per the official, the easing food inflation, combined with the high weightage of food in the CPI, is one of the prime reasons for overall retail inflation moderating.
“The weights of the components vary and we expect the divergence to continue for the next few months,” said DK Joshi, chief economist at
Economists expect high crude prices to keep wholesale inflation high that inturn would impact retail prices with a lag.