UBI Projects Wholesale Inflation to Hit 10.6% in September
Union Bank of India report predicts wholesale inflation will cross 10% in September due to rising food, energy, and manufacturing costs.
India is bracing for a significant spike in wholesale prices, with the Wholesale Price Index (WPI) inflation projected to surge past the 10 per cent threshold this September. According to a research report by Union Bank of India (UBI), the inflation rate is estimated to climb to 10.60 per cent year-on-year, up from 9.92 per cent recorded in August.
This jump marks a sharp reversal from the deflationary period seen in September last year, when the WPI stood at minus 0.20 per cent. The report warns that wholesale inflation is likely to remain in the double digits for the near term, with projections for FY27 still hovering around the 10 per cent mark.
Key Drivers: Food, Fuel, and Manufacturing Costs
The escalation in wholesale prices is being fueled by a combination of rising vegetable prices, increased manufacturing expenses, and a low base effect from the previous year. Several sectors are seeing intense upward pressure:
- Food WPI: Expected to rise to 7.90 per cent in September from 7.05 per cent in August.
- Vegetables: A major contributor, with vegetable prices projected to jump 15.18 per cent year-on-year. Month-on-month, vegetable prices rose by 8.50 per cent during September.
- Fuel WPI: Estimated to increase to 24.45 per cent in September from 22.96 per cent in August, largely driven by a renewed rise in crude oil prices.
- Energy Spikes: Inflation in crude petroleum and natural gas is projected to climb significantly to 52.93 per cent, up from 34.41 per cent in the previous month.
Beyond basic commodities, the report noted that inflation in spices and other manufactured food products has also maintained a double-digit trajectory.
Core Inflation and the Risk of Retail Spikes
While food and fuel are major headlines, Core WPI inflation—which excludes these volatile sectors—is also on the rise. It is expected to hit 9 per cent in September, up from 8.56 per cent in August. Interestingly, core inflation remains the largest contributor to the overall headline wholesale inflation, contributing an estimated 543 basis points in September.
The UBI report issued a stern caution regarding the "transmission" of these costs. As businesses face higher input costs, there is a high probability that these expenses will be passed on to consumers, eventually driving up retail prices across the country.
Potential Threats: El Niño and Geopolitical Tensions
The outlook for inflation remains clouded by several unpredictable risks that could push prices even higher:
- Weather Disruptions: The possibility of a "Super El Niño" and sluggish sowing of kharif crops could severely impact food availability.
- Seasonal Risks: Unseasonal winter rains could damage crops and disrupt supply chains.
- Global Factors: Escalating geopolitical conflicts and a weakening rupee continue to put pressure on essential imports.
- Festive Demand: With the festive season approaching, increased demand may add further heat to food inflation.