India’s wholesale inflation is expected to remain high in the near term amid volatile oil prices, rising shipping and insurance costs, and the potential impacts of El Niño on food prices, according to economists. Disruptions in key shipping routes and weather-related shocks are also contributing to sustained price pressures.
India’s wholesale inflation may stay elevated in the near term as swings in oil markets, higher shipping and insurance costs, and the strengthening effects of El Niño add to pressure on imported goods and food, economists said. According to Bank of Baroda economist Sonal Badhan, the outlook for global energy remains uncertain as hopes of a US-Iran peace deal fade and two key shipping corridors, the Strait of Hormuz and Bab al-Mandeb, remain exposed to disruption.
Badhan said that any further unrest along those routes could keep crude prices volatile, while higher insurance premiums would raise freight costs and filter through to import prices. Bank of Baroda research published earlier this year found that crude oil shocks tend to feed into wholesale inflation more sharply than retail prices, largely because fuel carries a heavier weight in the Wholesale Price Index and because some of the impact is absorbed before it reaches consumers.
Food costs are also likely to remain a concern. Badhan said the effects of El Niño are expected to intensify in August and September, which could keep both food inflation and headline wholesale price inflation high. That risk comes after July wholesale inflation reached 9.8%, with food, fuel and manufactured goods all contributing to the increase.
Prices of fruit, milk, eggs and meat products have been among the main food drivers, underscoring how quickly weather-related shocks and imported cost pressures can spread through the economy. Independent studies and recent reporting on El Niño’s impact on India’s agriculture have also pointed to weaker rainfall, softer crop output and higher food inflation in periods when the weather pattern is severe, though some analysts note that better irrigation and other farming changes have made the system somewhat more resilient in recent years.
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