Wholesale price index (WPI) inflation in India eased slightly in July but remained high at 9.78%, data released by the commerce ministry on Friday showed. The decline in WPI inflation last month, from 9.87% in June, was mainly led by lower fuel prices while wholesale food and core inflation continued to rise.
WPI inflation rose sharply in the wake of higher energy prices caused by the war in West Asia, which broke out in end-February. WPI inflation averaged 9.47% during April-July, sharply higher than -0.2% in the corresponding period a year ago.
“In our view, WPI inflation has peaked and gradual and modest disinflation from hereon should continue, in line with relatively lower global commodity prices in general and crude oil price in particular (since June),” Barclays economists Aastha Gudwani and Amruta Ghare said in a note.
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The impact of higher fuel prices, along with a rise in food prices, is visible across different measurements of inflation. Inflation measured by the output Producer Price Index (PPI), a new index expected to replace WPI in the next 5 years, remained steady at 9.57% in July.
Output PPI inflation was steady in July as a fall in manufacturing and mining inflation was offset by higher agriculture and electricity inflation. The trial input PPI for the manufacturing sector fell to 105.9 in July from 107.1 in June.
Spillover to Retail CPI
Higher food and fuel prices also pushed up retail inflation, as measured by the Consumer Price Index (CPI), to a 19-month high of 4.45% in July. CPI inflation has now stayed above the Reserve Bank of India’s medium-term target of 4% for two consecutive months.
“While WPI does not translate directly into retail inflation, sustained energy and input-cost pressures could gradually feed through to consumer prices if they persist,” said Prachi Kele, lead economist at PL Capital.
WPI fuel and power inflation fell to a four-month low of 20.05% in July, reflecting the fall in global energy prices that month. Offsetting the impact of lower fuel inflation were manufactured products and food items.
Manufactured products inflation, which has the largest weight in WPI, rose to a series high of 8.29% in July from 7.48% in June. The rise in manufactured products inflation is likely due to the pass-through of higher input prices, economists said.
Core WPI inflation, which excludes food and fuel items, also jumped to a series high of 8.2% in July from 7.5% in June.
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WPI food inflation rose to a 19-month high of 6.65% in July from 6.14% in June. The rise in wholesale food inflation was “largely led by a broad-based uptick across manufactured food items and most primary food articles barring fruits and vegetables,” said Rahul Agrawal, principal economist at ICRA.
“Looking ahead, the inflation outlook remains exposed to both external and weather-related risks,” said Rajani Sinha, chief economist, CareEdge Ratings. “The eventual trajectory of food inflation will depend on the spatial and temporal distribution of rainfall in the coming months.” CareEdge raised its WPI inflation projection for 2026-27 to 9% from the previous forecast of 7%.
TOPICSWPI InflationThis article was first uploaded on August fourteen, twenty twenty-six, at eighteen minutes past eight in the night. © The Indian Express (P) Ltd