India’s Wholesale Price Index: WPI Inflation Reaches Record High of 11.39% in September Driven by Rising Food and Fuel Costs
India’s wholesale price index (WPI)-based inflation surged to 11.39% in September, up from 9.92% in August. This increase is attributed to rising prices in food, manufactured goods, and fuel and power, according to government data released on Wednesday. The food index inflation rose to 8.66% in September, while inflation for manufactured items reached a series-high of 9.76%. Fuel and power inflation also accelerated, hitting 25.85% in September compared to 22.93% in August.
Reasons Behind Rising Wholesale Inflation
Wholesale inflation has been climbing since the start of the financial year, influenced by the ongoing conflict in West Asia and the resulting blockade of the Strait of Hormuz, which has driven up global crude oil and fertilizer costs. This rise has also impacted food and commodity prices. ICRA principal economist Rahul Agrawal noted that elevated global commodity prices have pushed WPI inflation to a record high. Food inflation based on WPI reached a 23-month high in September, with significant increases in the prices of cereals, pulses, fruits, and vegetables.
ICRA anticipates WPI inflation could rise further to 12% in October, driven by higher food prices and persistent global energy costs. Agrawal indicated that wholesale inflation is likely to remain in double digits through the third quarter of FY2027. Barclays also cautioned that wholesale and producer price inflation may accelerate in the coming months due to sustained high international energy and metal prices.
Impact on Producer Prices and Businesses
The output producer price index (OPPI) inflation rose to 11.4% year-on-year in September, up from 9.8% in August. This increase is primarily driven by higher manufacturing and mining producer price inflation, according to Barclays. Ranjeet Mehta, Secretary General and CEO of industry chamber PHDCCI, stated that the latest WPI figures indicate inflationary pressures across multiple production stages. While wholesale price changes do not directly translate to retail inflation, their persistence could impact corporate margins, working capital needs, and investment decisions.
Retail Inflation Trends
The rise in wholesale inflation coincides with an increase in retail inflation, which climbed to 5.54% in September from 4.83% in August, marking a 23-month high. This is the first month retail inflation has exceeded 5% under the new consumer price index (CPI) series introduced earlier this year. The rate has remained above the Reserve Bank of India’s 4% target for four consecutive months but is still within the central bank’s tolerance band of 2-6%.
Food inflation under the CPI rose to 7.7% in September, with notable price increases for onions (108%), garlic (55%), and lemons (36%). In contrast, prices for potatoes, tomatoes, and lady fingers declined. Higher inflation rates were also observed in goods transport and restaurant services, at 14.7% and 9.4%, respectively, due to rising fuel costs. The RBI’s Monetary Policy Committee recently raised the benchmark policy rate by 25 basis points to 5.50% amid these inflationary pressures.
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