​Fuller expression: on India’s inflation

India’s May retail inflation at 3.93% , the highest in the current CPI series and roughly a 15-month high if compared with the previous series, has begun to reflect the pass-through effects of surging food and fuel costs more clearly than in previous months. However, last month’s wholesale inflation numbers , the first under the new WPI series and due later this month alongside India’s first Producer Price Index (PPI ), should reveal how much of the price shock producers and wholesalers continue to absorb. May’s food inflation rose at a faster clip to 4.78% from 4.20% in April. While transport inflation rose by 1.75% after a marginal contraction in April, a subdivision within the sector — transport services for goods — surged by 7.63%, signalling growing price pass-through. This was largely driven by the four tranches of petrol and diesel price increases beginning in mid-May. Significantly, the sharp rise in commercial LPG prices — by about ₹1,300 per 19-kg cylinder, representing an increase of over 75% since February — appears to be reflected in inflation in the restaurants and accommodation services category, which stood at 5.75%, the second-highest division after personal care and miscellaneous goods and services. Inflation in the latter category reached 18.46%, reflecting soaring precious metals prices. Domestic LPG’s second price revision by ₹29 earlier this month will likely find a fuller expression in June’s consumer food price inflation.