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WPI inflation edges lower

* WPI inflation eased marginally to 9.8% YoY in Jul’26 from 9.9% YoY in Jun’26, marking the first moderation after several months of elevated producer price inflation.

* The decline was mainly driven by a correction in global crude oil prices, which lowered fuel inflation during the month. However, stronger inflation in primary articles and manufactured products partly offset the decline. Consequently, imported inflation eased in Jul'26 to 14.3% YoY from 16.4% in Jun'26.

* WPI Food Price Index accelerated to 6.6% YoY in Jul’26 from 6.1% YoY in Jun'26. While primary food inflation eased marginally to 5.4% YoY in Jul'26 from 5.5% YoY in Jun'26, the increase in the overall Food Index was driven by higher inflation in manufactured food products. This suggests that although inflation in primary agricultural produce remained broadly stable, rising costs of processing, packaging and other input items continued to drive up wholesale food prices across the supply chain.

* Manufactured products inflation rose to 8.3% YoY in Jul'26 from 7.5% YoY in Jun'26, highlighting that cost pressure continues to spread across the manufacturing sector. Inflation remained in double digits for chemicals (13.1% YoY), base metals (12.6% YoY), electrical equipment (12.3% YoY), textiles (12.8% YoY) and rubber & plastic products (10.4% YoY).

* Agricultural terms of trade worsened in Jul'26, as input prices increased by 13.5% YoY, while agricultural output prices rose by a comparatively lower 8.2%. As a result, agricultural terms of trade contracted by 4.6% YoY in Jul'26, slightly deeper than the 4.4% contraction in Jun'26.

* Output Producer Price Inflation (OPPI) remained elevated at 9.6% YoY in Jul'26, unchanged from Jun'26, broadly mirroring the WPI trend. Higher producer prices persisted across agriculture, mining and manufacturing, particularly in food products, chemicals, basic metals and textiles, indicating that firms continue to pass on higher production costs despite the recent moderation in global crude oil prices.

* Input Producer Price Inflation (IPPI) for the manufacturing sector declined by 1.1% MoM in Jul'26 after rising 0.6% MoM in Jun'26, reflecting easing input cost pressure. The moderation was driven primarily by lower prices of petroleum products, chemicals and textiles following the correction in crude oil prices. However, with OPPI remaining elevated, the easing in input costs has not yet translated into lower producer selling prices, suggesting that upstream price pressures remain significant.

Outlook

* Wholesale inflation is likely to remain elevated over the coming months, although the pace of increase could moderate if global crude oil prices stabilize. While the correction in crude oil prices after the US-Iran ceasefire agreement provided some relief in Jul'26, Brent crude has turned volatile over the past few days, trading in a range of USD83-89/bbl amid renewed geopolitical tensions in the Middle East and concerns over supply disruptions through the Strait of Hormuz. The recent rebound in crude prices has increased the risk of another round of imported inflation.

* Overall, input cost pressures have started to ease, providing some relief to manufacturers after several months of elevated commodity prices. However, given that output price remained unchanged at 9.6% YoY in Jul'26, the decline in input costs has not yet translated into lower producer selling prices. This indicates that firms continue to pass through earlier accumulated cost increases, while the recent moderation in input prices is likely to improve corporate margins if sustained over the coming months.

* Going forward, the trajectory of WPI inflation will depend on global crude oil prices, geopolitical developments, monsoon outcomes and domestic food supply conditions. A steady rise in crude oil prices could once again intensify imported inflation and keep fuel and manufacturing inflation elevated. At the same time, Super El Niño-related weather risks, weakening agricultural terms of trade and higher prices of non-food agricultural commodities could adversely affect the kharif crop and keep food inflation firm. Although the latest IPPI data suggests easing input cost pressure, the persistence of elevated OPPI indicates that producers continue to pass on earlier cost increases, implying that upside risks to wholesale and consumer inflation remain.

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