Inflation rose slightly in September

India's wholesale inflation reached a record high of 11.4% in September, up from 9.9% in August, according to official data released on Wednesday. The surge was primarily driven by increasing prices of fuel, food, and manufactured goods. The rise in wholesale inflation has been ongoing since the beginning of the fiscal year, fueled by conflict in West Asia and a blockade of the Strait of Hormuz, which has pushed up oil, fertilizer, and food prices.

In September, wholesale inflation decreased by 0.2% compared to the previous year. Devendra Pant, chief economist at India Ratings and Research, stated that the prolonged crisis in West Asia is expected to keep fuel and power inflation elevated until the crisis is resolved. Rahul Agrawal, principal economist at ICRA, noted that global commodity inflation expectedly led to a record-high WPI inflation in September.

Food inflation, which contributes to approximately a quarter of the WPI basket, hit a 23-month high of 8.7% in September, up from 7.1% in August. Retail inflation also increased to 5.54% year-on-year in September from 4.8% in August. Elevated commodity prices could maintain wholesale price pressures, which could indirectly impact the consumer price index (CPI) basket, said Rajani Sinha, chief economist at CareEdge Ratings.

Inflation in manufactured products rose to a record high of 9.8% in September, up from 8.4% in August. Among manufacturing sub-groups, inflation remained high in basic metals (17%), chemicals (16.7%), textiles (13.9%), rubber and plastic (13.5%), and tobacco products (12.9%). ICRA projects wholesale inflation to rise to around 12% in October, with an unfavorable base effect adding to price pressures.

Ind-Ra projects inflation to exceed 12% and remain in double digits until at least February 2027, unless the West Asia crisis is resolved.