A key data shows India's price pain is refusing to ease

India's wholesale inflation rose to 9.92% in August, remaining stubbornly around 10% for the fourth consecutive month. Food inflation climbed to 7.05% in August, up from 6.65% the previous month. The Wholesale Price Index (WPI) inflation for June was revised up to 9.97% from an initial estimate of 9.87%. Primary articles inflation eased to 7.76% in August, while fuel and power inflation spiked to 22.93% from 20.05%.

Manufactured products inflation remained steady at 8.37% compared to 8.29% in July. Petroleum and natural gas prices surged 34.41% year-on-year in August after increasing 26.99% in July.

Consumer inflation is expected to hit a 20-month high in August, driven by higher food and fuel prices, surpassing the Reserve Bank of India's 4% medium-term target for the third straight month. The central bank maintained interest rates in the previous month, though minutes of the latest meeting indicated a readiness to tighten policy if price pressures expanded. The RBI is not anticipated to raise rates until next year.

Monsoon irregularities disrupted food supplies, driving up prices of essentials like sugar, cereals, milk, edible oils, eggs, and meat. High global crude prices nearing $108 a barrel and increased cooking gas prices contributed to inflation. India's sugar export ban, initiated in May to control domestic prices, will continue until the end of September.

A separate Reuters poll suggested the RBI might raise rates by 25 basis points in the second quarter of 2027, followed by additional increases in the fourth quarter, potentially pushing the policy rate to 5.75%. RBI minutes revealed policymakers were considering a rate hike in the third quarter if higher food and fuel prices led to a broader inflation surge and eroded inflation expectations.

Governor Sanjay Malhotra stated that monetary response to supply-side shocks is warranted if inflation becomes generalized, expectations are de-anchored, or inflation remains persistent.