The rise in inflation has been mainly on account of 31.44 percent increase in prices of potato, 19.40 percent in fruits and 12.75 percent in rice, according to the official data on Wholesale Price Index (WPI) based inflation.
The food inflation stood at 9.50 percent last month, while the manufactured inflation was 3.55 percent.
Such high level of inflation was witnessed in December last year when it was 6.4 percent.
The WPI inflation was 5.20 percent in April and 4.58 percent a year ago in May. The March inflation figures have been revised upwards to 6 percent from 5.70 percent.
In his first address in the Lok Sabha last week, Prime Minister Narendra Modi had said, "We have promised to control inflation. We are determined achieve this target.”
The government is preparing contingency plans to deal with the impact of below-normal monsoon on food prices. The IMD has cut its June-September monsoon forecast to 93 percent.
Meanwhile on the global front, worsening political situation in Iraq is pushing up the crude oil prices which will have a bearing on inflation.

As per the data, core inflation rose to 3.8 percent in May from 3.4 percent in April.

During May, inflation in fuel and power category stood at 10.53 percent, while it was 4.94 percent in non-food articles.
The rate of price rise in protein rich items like egg, meat and fish was 12.47 percent and 9.57 percent in milk.
Rising inflation will make it difficult for the RBI to cut interest rates to boost growth. It had hold rates steady for last two policies to check inflation.

Weak monsoon may push food prices further: India Inc

India Inc on Monday said that containing rising prices will be of 'utmost importance' to revive the economy, which is facing a possibility of below- normal monsoon.

Barclays (India) Chief Economist Siddhartha Sanyal: The surge in inflation has indicated hard times in the future. The risks from a poor monsoon and uncertainties around global oil prices due to geopolitical tensions in Iraq remain.
Ficci President Sidharth Birla:
With food and fuel prices being the key driving factors, upside risks to inflation continue. The sub par monsoon outlook for this year could put pressure on food prices going ahead.
CII Director General Chandrajit Banerjee: Containing the price rises is of utmost importance to revive the industrial production as persistent inflation has caused interest rates to follow a tight trajectory and added to the cost of capital for industry, thereby impacting growth. The government should consider a multi-pronged approach which includes implementation of model APMC Act, developing advanced supply chains, rationalise input subsidies, effect a moderation in MSP (Minimum Support Price), right-size buffer stock, improve agricultural productivity, focus on crop diversification, augment investment in agri-infrastructure and encourage foreign direct investment (FDI) in retail.

Assocham Secretary General D S Rawat: Supply chains are presently very long with numerous middlemen, a number of whom needs to be shortened by connecting farmers directly to organized processors, retailers and exporters. This needs the scrapping of the Agriculture Produce Marketing Committee (APMC) Act, thereby allowing farmers to sell their produce freely. Similarly, taxes and commissions on agriculture products in both their raw and processed forms need to be minimized. Private sector must be encouraged to invest at the back-end to streamline value chains.

PHD Chamber of Commerce President Sharad Jaipuria: Focusing on farm sector including the agri-supply chain infrastructure will prevent jump in prices of various commodities especially the food items which causes cascading impact on the overall WPI inflation scenario.

ICRA Senior Economist Aditi Nayar: Persistence of the rise in crude oil prices and the weakness in the Indian Rupee in the ongoing month could feed through to higher core inflation going ahead.

Rupee hits six weeks low after WPI accelerates

The rupee hit 60.23 in trade on Monday, its lowest level since May 6, after government data showed wholesale price inflation surged to a five-month high.

At 12:46 pm, the rupee was at 60.1850/1950 versus its close of 59.76/77 on Friday.

The rupee was already trading weaker since it opened as surging crude oil prices threatened to push up domestic inflation pressures and aggravate the country's current account deficit.

Traders expect the rupee to trade in the 59.90/60.25 band during the session.

Sensex slips to over 10-day low on rising inflation, weak rupee
The benchmark Sensex on Monday fell for the second session and ended 37.69 points down at 25,190.48, its lowest level in over ten days, as banking shares slipped after wholesale inflation surged amid a weak rupee.
Besides, rising crude oil prices in global markets on escalating tensions in Iraq further dampened hopes of a rate cut by the RBI as WPI inflation in May rose to five-month high.

In choppy movements, the 30-share BSE barometer resumed 34 points lower in line with weakness in Asian stocks. It declined further to a low of 25,063.93, down over 160 points at one stage but rebounded to 25,268.41.


Latest News  from Business News Desk