Wholesale price inflation nears double digits in August; next month may be worse

Wholesale price inflation inched up to 9.92% in August from 9.78% in July, as the West Asia flare-up boosted energy prices and food items turned dearer. With a durable resolution to the Iran war still elusive and below-par seasonal showers likely to hit the summer-sown crop harvest, analysts expect wholesale price inflation to hit double digits in September.

In August, inflation in crude petroleum and natural gas jumped 34.41%, compared with 26.99% in July, lifting fuel and power inflation to 22.93% from 20.05% in the previous month. Inflation in the two other major groups—manufactured products and primary articles—touched 8.29% and 8.52%, respectively in August, from 8.37% and 7.76% in the previous month.

Overall, food inflation scaled a 20-month high of just over 7% in August from 6.6% in July, driven by the fruits and vegetables, milk, spices, and sugar segments. However, the rise in non-food products moderated, limiting the acceleration in the headline wholesale price index (WPI).

Elevated wholesale inflation feeds into retail prices as businesses and other intermediaries pass on rising input costs to final consumers. While the central bank officially aims to keep retail inflation within its 2-6% range, it closely tracks all other price indicators as well for cues on which way the broader price pressure in the economy is moving.

Retail inflation quickened to a 19-month high of 4.45% in July, still remaining within the Reserve Bank of India’s (RBI) 2-6% band. The large gap between retail and wholesale price inflation rates indicates not only differences in the composition of the gauges but also the inability of businesses to fully pass on rising costs to consumers, analysts said.

Devendra Pant, chief economist at India Ratings & Research, said while the global supply-chain disruption had minimal impact on India’s gross domestic product growth in the June quarter, it has significantly impacted inflation.

"With the West Asia crisis remaining unresolved (similar to the Russia-Ukraine war), the global uncertainty is likely to remain elevated in the near term. This, along with deficient rain and weaker currency, would continue to push inflation higher in the short term," he said, expecting the September WPI inflation to touch 10.2%. WPI inflation may remain elevated in the rest of 2026 as well, unless a permanent solution to the West Asia crisis is achieved, he added.

Meanwhile, core WPI inflation, essentially the price rise in non-food manufactured products, eased a tad to 8.1% in August from 8.2% in July. It still remained elevated, with as many as seven of the 21 sub-sectors, including chemicals and metals, reporting double-digit inflation in August, said Rahul Agrawal, principal economist at rating agency Icra.

"We expect food inflation to harden further in September-October 2026, on the back of an unfavourable base, as well as the stronger-than-usual sequential hardening in prices of some food items such as sugar, which could sour sentiment during the festive season," Agrawal said.

Besides, the rise in global commodity prices will likely keep fuel and core-WPI inflation readings elevated in the near term, he added.

In its August monetary policy committee meeting, the RBI had flagged El Niño’s impact on temporal and spatial rainfall distribution as a risk, adding proactive supply management and adequate stocks of grains could provide buffers.

“Global oil prices have remained volatile with sharp two-way movements triggered by geopolitical developments, blurring the near-term outlook. Although generalized inflation pressures continue to remain modest so far, the risks of higher food, fuel and other input prices translating into a broad-based increase in inflation persist,” it had said.

It projected retail inflation for 2026-27 at 5%, expecting the price pressure during the July-September quarter at 4.7%. It also forecast the retail inflation at 5.9% for the December quarter and 5.5% for the last quarter of this fiscal year.

Catch all the Business News , Economy news , Breaking News Events andLatest News Updates on Live Mint. Download TheMint News App to get Daily Market Updates.

Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.