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Below the Perspective on WPI Data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings

“WPI inflation rose to 11.4% YoY in September from 9.9% in August, driven by a broad-based increase across all major categories. Fuel and power inflation remained elevated as crude petroleum; natural gas and mineral oil prices continued to rise amid uncertainty surrounding key maritime chokepoints. Both India’s crude basket and spot Brent crude prices are trading well above Brent crude futures, indicating tightness in the physical supply of crude oil. The Indian crude basket and spot Brent crude prices averaged around USD 123/bbl and USD 126/bbl, respectively, in October so far, compared with an average of USD 103/bbl for Brent crude futures. While retail fuel prices have remained unchanged, oil marketing companies have raised bulk diesel prices, which are now nearly Rs 50–60 per litre higher than retail prices. Persistently elevated crude oil prices could increase freight, agricultural and irrigation, and transportation costs. Beyond energy, prices of select base metals, particularly copper and aluminium, have remained elevated, with copper touching an all-time high. Supply disruptions and strong demand from electrification, renewable energy expansion and data centers have supported metal prices. Elevated commodity prices are concerning as they could sustain wholesale price pressures and indirectly feed into the CPI basket. Meanwhile, inflation in manufactured products firmed up, indicating a gradual pass-through of higher input costs. Food inflation also increased, with higher prices of select vegetables, including onions, along with sugar, edible oils and foodgrains, pushing primary food articles inflation to 8.1% YoY. Deficit monsoon and lower reservoir levels will impact food crop production in the current fiscal year. In line with WPI inflation, output PPI inflation also climbed to 11.4% in September from 9.8% in the previous month.

Looking ahead, the inflation outlook remains vulnerable to geopolitical and weather-related risks. Uncertainty surrounding key shipping routes and attacks on energy infrastructure continue to keep energy prices volatile. On the domestic front, a deficient monsoon poses risks to agricultural production. Although kharif sowing is lower by only around 1% YoY, below-normal rainfall could adversely affect crop yields. Lower reservoir levels and inadequate soil moisture in several regions could also affect rabi crop production. The government may resort to supply-side interventions to contain food inflation. Taking these factors into account, we revise our projection for average WPI inflation to around 10% in FY27.”

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