Wholesale inflation rises to a four-month high of 0.52% in August

WPI for August

India's wholesale inflation edged back into positive territory in August, rising to a four-month high of 0.52 percent, government data released on September 15 shows. The wholesale price index (WPI) had dipped to a 25-month low of –0.58 percent in July.

The trajectory mirrors consumer inflation, which rose to 2.07 percent in August after touching an eight-year low of 1.61 percent in the previous month.

Retail food inflation stayed negative for the third consecutive month, though the pace of deflation narrowed.

Wholesale food inflation followed a similar trajectory with food inflation rising to 0.21 percent from -2.15 percent in the previous month.

"Food items accounted for as much as 73 bps of the 110 bps uptick in the headline WPI print between August 2025 and July 2025. This was followed by core WPI (non-food manufactured items) which added 27 bps to the headline print, with the inflation in the same rising to a 5-month high of 1.6% in August 2025," said Rahul Agrawal, senior economist, ICRA.

Manufactured products, which make up nearly two-thirds of the WPI basket, also rose to a four-month high of 2.55 percent in August from 2.05 percent in the previous month.

"Lower deflation in food articles and higher manufactured WPI inflation drove the increase in headline, even though fuel deflation deepened. Sequentially, headline WPI rose by +0.52 percent m/m nsa (July: +0.46 percent) versus a median m/m increase of 0.26 percent typical of August," said Aastha Gudwani, India chief economist, Barclays.

Fuel deflation eased to 9.9 percent in August compared with 11.1 percent in the previous month.

Economists expect prices to cool further once the GST rate cuts take effect from September 22. The GST council approved a two-rate structure earlier this month, shifting 90 percent of items into lower tax brackets.

"The full impact of GST rate rationalisation will start commencing from October. We expect FY26 wholesale inflation to remain benign. While the low inflation trajectory is good news for the consumers, it is not so good for the government balance sheet. Impact of slower GDP growth is already visible in government finances and tax collection growth trailing FY26 budget targets. The demand push due to GST rate rationalisation will be key to monitor for fiscal impact," said Paras Jasrai, associate director, India Ratings and Research.

The mix of high growth and low inflation is likely to keep the Reserve Bank of India to hold rates steady during September 29-October 1 monetary policy review.

GDP rose to a five-quarter high of 7.8 percent in April–June, prompting economists to raise their full-year forecast to 6.5 percent.

"While the expectations of a relatively more favourable CPI inflation trajectory following the GST rationalisation opens up space for a rate cut by the MPC, the positive impact of the same on growth outcomes in H2 FY2026, along with the stronger-than-expected GDP growth in Q1 is likely to result in a status quo in the upcoming October 2025 review meeting," said Agrawal.

The central bank has already cut the repo rate by 100 basis points this year to 5.5 percent. Economists expect one more 25 bps later in the year, factoring in tariff pressures and the possibility of easing by the US Federal Reserve.

Economists expect wholesale inflation to rise in September but settle at lower levels for FY26.

"For FY26, we project WPI inflation to average around 0.3 percent," said Rajani Sinha, chief economist, CareEdge.