WPI Inflation Eases To 9.78% In July, But Fuel-Led Relief Masks Rising Factory Prices

India’s wholesale inflation showed a marginal sign of relief in July, with WPI inflation easing to 9.78% from 9.87% in June. It was the first month-on-month decline in nine months, but the moderation was largely driven by a sharp fall in fuel-related inflation rather than a broad-based easing in price pressures.

The biggest relief came from the Fuel & Power segment, where inflation fell sharply to 20.05% in July from 27.41% in June. Petroleum-related products, particularly mineral oils, played a major role in the decline. Crude petroleum and natural gas prices also recorded lower inflation during the month.

However, several other components moved in the opposite direction. Primary Articles inflation rose, while inflation in the much larger Manufactured Products category accelerated to 8.29% from 7.48%. The government identified basic metals, manufactured food products, chemicals and chemical products among the key drivers of wholesale inflation in July.

The food picture was also mixed. Inflation in Food Articles edged down marginally to 5.44% from 5.49%. But manufactured food prices increased, meaning the broader food inflation picture remained under pressure.

The latest Output Producer Price Index (PPI) data provides another reason for caution. Output PPI inflation remained unchanged at 9.6% in July, despite the decline in WPI, suggesting that the moderation in wholesale prices has not yet translated into a broader easing in producer-level price pressures.

India is also shifting gradually from WPI to PPI, following a model already used by major economies such as the US and UK. The government will publish both measures for five years before phasing out WPI, while Output PPI is already replacing WPI for 234 IIP item groups. The shift aims to provide a more modern and detailed measure of producer prices.

For now, July’s numbers offer some relief, but not a clean victory over inflation. Fuel-led disinflation has pulled the headline figure lower, while manufacturing and primary commodity prices remain elevated. The key question is whether the moderation in energy prices will continue or whether renewed crude and geopolitical pressures will push wholesale inflation higher again.