The Wholesale Price Index (WPI)-based inflation was nil in August 2025.
“With West Asia crisis remained unresolved (similar to Russia-Ukraine), global uncertainty is likely to remain elevated in near-term,” said Devendra Pant, chief economist at India Ratings and Research (Ind-Ra). He added that the uncertainty along with deficient rain and weaker currency, would continue to push inflation higher in near-term.
Fuel and power remained the largest contributor to wholesale inflation, rising to 22.9% in August from 20.1% in July. Within the segment, mineral oil inflation climbed 38.5% compared with 32.4% in the previous month, while inflation in crude petroleum and natural gas rose to 34.4% from 27%.
“Despite deflation in electricity prices, renewed spurt in crude petroleum prices in August due to West Asia crisis has pushed fuel and power inflation and is expected to remain elevated until a permanent solution to the crisis is achieved,” said Pant.
Inflation in manufactured products increased marginally to 8.4% year-on-year in August from 8.3% in July, while inflation in primary articles eased to 7.8% from 8.5%.
Among manufacturing sub-groups, inflation remained elevated in chemical products (14.3%), tobacco (13.2%) and textiles (12.6%).Food inflation, which accounts for around a quarter of the WPI basket, rose to a 20-month high of 7.1% in August from 6.7% in July.
“WPI-food inflation was largely led by the fruits and vegetables, milk, spices, and sugar segments,” said Rahul Agrawal, principal economist at ICRA.
Looking ahead, Agrawal said food inflation is expected to harden further in September-October, driven by an unfavourable base, as well as the stronger-than-usual sequential increases in the prices of some food items such as sugar, which could sour sentiment during the festive season.
The Producer Price Index (PPI) output inflation also grew to 9.8% year-on-year in August from 9.6% in July. The government also released a trial Input PPI for manufacturing, which fell to 104.2 in August 105.9 in July, indicating a 1.6% decline.
Outlook
Ind-Ra expects wholesale inflation to increase to 10.2% in September and remain elevated through the rest of 2026 unless a permanent solution to West Asia crisis is reached.
ICRA projects WPI inflation to exceed 9.5-10% in September-October before cooling thereafter, aided by a favourable base, unless global energy and commodity prices rise further from the current levels.