India’s Wholesale Price Index (WPI) inflation surged to a record high of 11.39 per cent in September, a significant increase from 9.92 per cent in August. This rise is attributed to escalating prices in food, manufactured goods, and fuel and power, according to government data released on Wednesday. The food index saw inflation climb to 8.66 per cent in September, up from 7.05 per cent in the previous month.

Manufactured items also contributed to the inflationary trend, with WPI inflation reaching a series high of 9.76 per cent, compared to 8.37 per cent in August. In the fuel and power category, inflation was recorded at 25.85 per cent in September, a notable increase from 22.93 per cent in August. These figures indicate a broader trend of rising costs across various sectors.

Barclays, in a recent research note, indicated that the ongoing elevation in international energy and metal prices could lead to further acceleration in wholesale and producer price inflation in the upcoming months. The WPI has been on an upward trend since the start of the fiscal year, influenced by geopolitical tensions in West Asia and the resulting blockade of the Strait of Hormuz, a crucial route for crude oil imports into India.

Impact Of Global Commodity Prices On Inflation

Rahul Agrawal, Principal Economist at ICRA, stated that the persistent rise in global commodity prices has significantly impacted WPI inflation, pushing it to unprecedented levels. The food inflation component of the WPI reached a 23-month high, driven by substantial increases in the prices of cereals, pulses, fruits, and vegetables. This trend reflects the broader challenges faced by the agricultural sector amid rising costs.

Given the ongoing pressures from food inflation and the lack of relief in global energy and commodity prices, ICRA anticipates that WPI inflation could rise further to approximately 12 per cent in October. The adverse base effect from the previous year is also expected to contribute to this increase. Agrawal noted that WPI inflation is likely to remain in double digits throughout the third quarter of FY2027.

Additionally, the Output Producers Price Index (OPPI) inflation rose by 11.4 per cent year-on-year in September, up from 9.8 per cent in August. The increase in OPPI inflation is primarily driven by heightened inflation in manufacturing and mining sectors, as reported by Barclays.

Monetary Policy Response To Rising Inflation

In response to the rising inflationary pressures, the Reserve Bank of India’s monetary policy committee recently raised the benchmark policy rates by 25 basis points to 5.50 per cent. This decision reflects the central bank’s efforts to manage inflation and stabilise the economy amid challenging conditions.

Earlier this week, retail inflation data revealed that inflation reached a 23-month high of 5.54 per cent in September, an increase from 4.83 per cent in August. This rise is largely attributed to a sharp increase in food prices, further highlighting the interconnectedness of wholesale and retail inflation trends in the current economic climate.

The ongoing inflationary environment poses significant challenges for policymakers and consumers alike, as rising costs are felt across various sectors. The government and financial institutions are closely monitoring these developments to implement measures aimed at stabilising prices and supporting economic growth.

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