WPI Inflation to Stay Elevated in FY27; Retail Pass-Through Seen Limited
Wholesale inflation remains high at 9.8% in July, with FY27 outlook elevated due to food and fuel costs. Retail inflation pass-through expected to be limited.
India's wholesale price inflation is expected to remain elevated through the next fiscal year, even as the headline rate saw a marginal easing in July. The wholesale price index (WPI) rose 9.8% year-on-year in July, a slight dip from June's 9.9% reading, according to a research report from ICICI Bank.
The persistence of high wholesale inflation is attributed to a low statistical base, firm food and fuel prices, and uncertainty in global energy markets. However, the report suggests that the pass-through to consumer prices will be limited, with retail inflation projected to average 4.8% in FY27. Sustained high global crude oil prices remain a key upside risk to the wholesale inflation trajectory.
The July moderation was largely driven by a cooling in fuel and power inflation, which eased to 20% from 27.4% in June. Mineral oils inflation also softened to 32.4% from 46.5%, while LPG prices fell 9.1% month-on-month. Despite this, global crude oil has averaged USD 86.8 per barrel in FY27 so far, compared with USD 69 per barrel in FY26, keeping upward pressure on prices.
Meanwhile, inflation in primary articles accelerated to 8.5% in July, reaching a 21-month high. Non-food articles saw a sharp rise to 17.7%, while food articles inflation held steady at 5.4%. Manufactured product inflation climbed to 8.3%, its highest in 28 months, with elevated price pressures across chemicals, textiles, basic metals, and food products.
Producer price pressures remained firm, with output PPI unchanged at 9.6%, its highest level since April 2024. An improved monsoon and better sowing outlook could support some moderation in food inflation in the second half of FY27.