WPI inflation: Oil volatility and El Nino to keep prices elevated in Aug–Sep
Synopsis
India's WPI hit 9.8% in July and economists warn it won't ease soon — oil-price swings tied to Middle East shipping route threats, surging freight insurance costs, and a strengthening El Nino are converging to keep food and commodity prices elevated through September. The pressure is broad-based: fuel, food, and manufactured goods are all contributing.
Key Takeaways
Headline WPI rose to 9.8 per cent in July , with all major groups — food, fuel, and manufactured products — contributing.
Fuel and power inflation stood at 20 per cent year-on-year in July, easing from 27.4 per cent in June; mineral oil inflation rose 32.4 per cent .
Global crude prices were 21 per cent higher year-on-year in July and 26.5 per cent higher through August.
Threats to the Strait of Hormuz and Bab al-Mandeb Strait are driving oil-price volatility and higher freight insurance costs.
El Nino effects are expected to intensify in August–September , adding further pressure on food inflation.
Input PPI showed upside pressure in only 10 of 21 manufactured product sub-indices, indicating uneven cost pass-through.
Oil-price volatility, rising insurance and freight costs, and intensifying El Nino effects are expected to sustain upward pressure on imported commodities, food prices, and headline Wholesale Price Index (WPI) inflation through August–September, according to economists. The warning comes after headline WPI climbed to 9.8 per cent in July, with all major category groups contributing to the elevated reading.
Key Drivers Behind the Pressure
Sonal Badhan, Economist at Bank of Baroda, pointed to fading prospects of a peace deal between the US and Iran and continued threats to two critical global waterways — the Strait of Hormuz and the Bab al-Mandeb Strait — as primary sources of crude-price instability. Higher insurance premiums are compounding the problem by pushing up total freight costs, which in turn feed through to the price of imported goods.
'Higher cost of insurance will add to the total freight cost, which in turn will pose upside pressures on imported commodities. Also, the effect of El Nino is expected to get stronger in August–September period. This will also maintain pressure on food inflation and headline WPI,' Badhan said.
What the July WPI Data Shows
The July WPI reading of 9.8 per cent was broad-based. Output Producer Price Index (PPI) rose 9.6 per cent year-on-year, a sharp reversal from a contraction of 0.5 per cent in the same period last year. Food inflation remains a major driver, with fruits, milk, eggs, and meat products all recording upward pressure.
Within the fuel sub-index, the mineral oil index stayed elevated, with prices of crude petroleum, natural gas, ATF, LPG, and lubricant oils all rising notably. Fuel and power inflation came in at 20 per cent year-on-year in July — moderating from 27.4 per cent in June but still historically high. Mineral oil inflation specifically rose 32.4 per cent, while crude petroleum and natural gas prices increased 27 per cent.
Global Crude Prices Add to the Strain
Global crude prices were approximately 21 per cent higher year-on-year in July and had risen a further 26.5 per cent year-on-year through August, according to economists tracking the data. Geopolitical tensions and disruptions along key shipping routes have added a persistent volatility premium to energy markets.
Notably, input PPI showed a more mixed picture: month-on-month upside pressure was visible in only 10 of the 21 manufactured product sub-indices, including basic metals, machinery, beverages, furniture, and non-metallic mineral products — suggesting that upstream cost transmission remains uneven.
What to Watch in the Coming Weeks
With El Nino effects expected to intensify through September, food-price pressures on items such as fruits and dairy are unlikely to ease quickly. Any further deterioration in Middle East geopolitics — or a new disruption along the Hormuz or Bab al-Mandeb corridors — could push crude prices higher still, adding a second layer of pressure to an already elevated WPI print. Policymakers and investors will be closely watching the next monthly WPI release for signs of whether the inflation trajectory is stabilising or broadening further.
Point of View
Logistics, and climate risks that policymakers have limited tools to address in the short term. What is underappreciated is the insurance-freight feedback loop: as shipping-route risks rise, freight insurance premiums climb, and those costs embed themselves in import prices well before any crude-price move shows up in the headline number. El Nino adds a second, largely uncontrollable variable. The real concern is not whether WPI peaks in August or September, but whether a prolonged elevated print begins feeding into consumer prices — a transmission that has historically lagged by two to three months.
NationPress
17 Aug 2026
Frequently Asked Questions
Why is India's WPI inflation expected to remain high in August–September?
Economists cite three converging pressures: oil-price volatility linked to Middle East geopolitical tensions and threats to key shipping routes, higher insurance and freight costs that raise the price of imported goods, and a strengthening El Nino expected to push food prices higher through September.
What was India's headline WPI in July?
India's headline WPI stood at 9.8 per cent in July, up sharply from a contraction of 0.5 per cent in the same month last year. Output PPI also rose 9.6 per cent year-on-year in the same period.
How are the Strait of Hormuz and Bab al-Mandeb affecting Indian prices?
Both waterways are critical global oil and shipping corridors. Threats to their security raise the risk premium on crude oil and push up freight insurance costs, which economists say will translate into higher imported commodity prices for India.
What is El Nino's impact on food inflation in India?
El Nino typically disrupts monsoon patterns, affecting agricultural output. Economists expect its effects to intensify in August–September, sustaining upward pressure on food items including fruits, milk, eggs, and meat products — all of which were already showing elevated WPI readings in July.
Which sectors are driving the elevated WPI reading?
Fuel and power inflation rose 20 per cent year-on-year in July, while mineral oil inflation climbed 32.4 per cent. Food inflation is also a major driver, with fruits, milk, eggs, and meat products under pressure. Among manufactured goods, cost pressures were more selective, visible in 10 of 21 sub-indices.
