Global energy, weather risks threaten further easing in wholesale inflation: Economists

Wholesale inflation in India is expected to stay high despite a slight decrease in July, according to economists. The Wholesale Price Index (WPI) inflation rate for July 2026 was 9.78 percent, a small drop from 9.87 percent in June. The reduction was mainly due to a significant slowdown in fuel and power inflation, which fell to 20.05 percent in July from 27.41 percent in June.

However, economists warn that the overall inflation situation remains a cause for concern. Manufacturing costs continue to be high, and risks from global energy markets and domestic weather conditions could put additional pressure on prices. Raj Sinha, Chief Economist at CareEdge Ratings, noted that while WPI inflation eased marginally to 9.8 percent in July from 9.9 percent in June, fuel and power inflation remains high at 20 percent.

The decline in fuel and power inflation was driven by lower prices of mineral oils, crude petroleum, and natural gas, reflecting a sequential softening in global energy prices in July.

Moreover, Prachi Kele, Lead Economist at PL Capital, emphasized that despite the marginal easing, wholesale inflation remains elevated. She pointed out that while WPI does not directly translate into retail inflation, sustained energy and input-cost pressures could gradually influence consumer prices if they persist.

The Private Housing and Development Confederation of India (PHDCCI) echoed similar concerns, identifying renewed increases in global crude and commodity prices, persistent metal and chemical price pressures, and weather-related disruptions to food supply as key risks. PHDCCI CEO and Secretary General, Ranjeet Mehta, expressed the view that the immediate outlook remains one of elevated but potentially moderating wholesale inflation, with risks stemming from renewed increases in global crude and commodity prices, ongoing metal and chemical price pressures, and weather-related disruptions to food supply.

ICRA Principal Economist Rahul Agrawal anticipates a larger easing in WPI inflation to fall below 9.5 percent in August 2026, following its peak at 9.9 percent in May-June 2026. However, Agrawal foresees wholesale inflation remaining elevated for much of the year, with an average WPI inflation forecast of around 8.5 percent for the fiscal year 2027. Despite these forecasts, Agrawal believes that inflation prints are likely to remain high throughout the year, contributing to a high nominal GDP growth figure.