Wholesale inflation may remain elevated through FY27 on high energy, food prices
ICICI Bank report warns that high energy, food, and fuel prices will keep India's wholesale inflation elevated through FY27.
India's wholesale price inflation is expected to face persistent upward pressure through the 2026-27 financial year, driven by a volatile mix of rising global energy costs, expensive food items, and an unfavourable base effect. According to a recent research report by ICICI Bank, these economic headwinds are likely to keep wholesale prices elevated in the near term.
Surge in WPI Inflation
The Wholesale Price Index (WPI) inflation saw a significant jump, rising to 11.4 per cent year-on-year in September 2026, up from 9.9 per cent in August. This spike was largely fueled by increases in the cost of fuel, manufactured goods, and food products. A major factor complicating the comparison is the low base effect; in September 2025, inflation stood at minus 0.2 per cent, making the current year-on-year growth appear much sharper.
Energy and Fuel Pressures
The energy sector has emerged as a primary driver of inflationary pressure. Fuel and power inflation climbed to 26 per cent in September, compared to 23 per cent in August. This surge was largely dictated by the rising cost of mineral oils, where inflation hit 40 per cent.
The report highlighted a stark rise in global crude oil prices, which averaged approximately USD 69 per barrel in FY26 but have climbed to USD 94.6 per barrel in the current financial year. Such high global energy prices, combined with increased transportation costs, are expected to push fuel inflation even higher in the coming months.
Manufacturing and Commodity Spikes
The manufacturing sector is also feeling the heat, with manufactured products inflation reaching a 30-month high of 9.8 per cent in September, up from 8.4 per cent in August. Key sectors within manufacturing showed significant increases:
- Basic Metals: Jumped to 17 per cent from 11 per cent due to global commodity trends.
- Chemical Products: Recorded inflation at 16.7 per cent.
- Textiles: Saw inflation at 14 per cent.
- Rubber and Plastic: Recorded 13.5 per cent inflation.
- Electrical Equipment: Stood at 12 per cent.
Food Inflation and Monsoon Concerns
Food prices remain a critical concern for the economy. Primary food article inflation rose to 8.1 per cent in September. The report noted that a below-normal monsoon could potentially keep cereal and pulse prices high, adding further strain to the food sector.
Specific food items have seen astronomical price hikes:
- Vegetables: Inflation soared to 16.5 per cent, up from 3.1 per cent in August.
- Onions: Prices witnessed a staggering 191 per cent year-on-year increase.
- Garlic: Contributed to a series high in condiments and spices inflation (34.3 per cent), following a 98.7 per cent rise in garlic prices.
- Fruits: Recorded a 16.6 per cent year-on-year increase.
Producer Price Index Trends
Reflecting these broader trends, the output Producer Price Index (PPI) also climbed to 11.4 per cent in September from 9.8 per cent in August. This rise is attributed to higher prices in both the mining and manufacturing sectors, with mining output prices increasing by 21.3 per cent year-on-year.