India’s wholesale inflation moderates in August, food prices drive risk

India's wholesale inflation was likely to be moderated marginally in August, with a year‑on‑year rate of 9.34% compared to 9.78% in July, according to a Union Bank of India research report. The forecast attributes the moderation to a sharp decline in fuel inflation and a rise in core WPI, which remained elevated at 8.93%.

Food WPI rose to 8.14% in August, driven by higher prices in sugar, cereals, vegetables, and fruits, and contributed 223 basis points to headline inflation, up from 182 basis points in July. Risks for the festive season include a below‑normal monsoon and a lagging sowing progress, with a rainfall deficit of 14% and a 1.6% lag in sowing from last year.

Fuel inflation cooled to 13.97% in August from 20.06% in July, reducing its contribution to headline inflation to 172 basis points from 248 basis points, while manufactured‑product inflation remained steady at 8.39% versus 8.27% in July. UBI Research expects a shallow rate normalisation cycle of 2‑3 hikes, taking the repo rate to 5.75‑6.00% levels, and will monitor monsoon progress and global developments to assess their impact on the macroeconomic outlook.

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