A Crisil report released on Wednesday, 27 May 2026 has warned that input costs for Indian manufacturers are set to remain elevated throughout the year — even after the Strait of Hormuz reopens — as the ripple effects of the West Asia conflict continue to broaden across commodity categories. The report noted that with domestic demand holding up so far, manufacturers have room to pass on higher costs to consumers, which could place upward pressure on Consumer Price Index (CPI) inflation, particularly core CPI, in the coming months.

Key Developments in Wholesale and Consumer Prices

Wholesale Price Index (WPI) inflation is expected to be the first indicator to reflect the pressure, with consumer prices likely to follow. In fiscal 2026, overall WPI inflation was a modest 0.7%, while non-food WPI stood at 1.1%. However, by April 2026, overall WPI inflation had surged to 8.3% — up sharply from 3.9% in March — while non-food WPI jumped to 10.9% from 4.7%.

Within specific categories, the price acceleration was stark: copper prices surged 17.3%, aluminium rose 20.6%, crude oil-related inputs spiked 49.3%, and gas-related inputs climbed 19.1% in April, according to the report.

Crisil's Input-Output Ratio Crosses Critical Threshold

Crisil's input-output ratio, derived from WPI data, crossed the 1.0 mark in April 2026 — the first time it has done so in 44 consecutive months. The ratio stood at 1.02, driven by a 6.2% month-on-month rise in input prices against a comparatively muted 0.7% increase in output prices. The last time this ratio breached the 1.0 threshold was in March 2022, in the wake of the Russia-Ukraine conflict, and it remained elevated for five months thereafter.

This signals that manufacturers are absorbing more cost than they are recovering through pricing — a dynamic that historically precedes a broader consumer price uptick.

What Is Driving the Cost Surge

The report attributed the sharp rise in input costs primarily to higher energy prices — particularly for crude petroleum, natural gas, and mineral oils — alongside elevated manufacturing costs across steel, basic chemicals, fertilisers, plastics, synthetic rubber, man-made fibres, plastic products, non-ferrous metals, and other non-metallic mineral products.

Notably, some critical inputs had already been under pressure before the current conflict. Copper prices rose 8.7% on average in fiscal 2026 — above their decadal average of 7.8% — while aluminium climbed 6.5%, exceeding its decadal average of 5.4%.

The Hormuz Factor and Its Broader Impact

The Crisil report described the West Asia conflict as having 'sparked the largest oil shock the world has seen so far,' with the closure of the Strait of Hormuz amplifying the shock beyond oil to a wider set of input categories. 'The closure of the Strait of Hormuz has only broadened the shock to other input categories even as manufacturers are already grappling with higher costs from critical inputs such as copper and aluminium,' the report stated.

This comes amid a period when Indian manufacturers had largely benefited from subdued global commodity prices, allowing them to keep output prices in check. That buffer appears to have eroded sharply in the April data.

What Comes Next for Inflation

With input costs expected to remain sticky even post-Hormuz reopening, analysts will closely watch the transmission into retail prices over the next two to three months. A sustained rise in core CPI would complicate the Reserve Bank of India's (RBI) monetary policy calculus, particularly if it coincides with any demand-side pressures. The trajectory of global energy prices and the duration of the Hormuz disruption will be pivotal in determining how much of the wholesale cost surge eventually lands on Indian consumers.