WPI inflation to face further upside as oil and metal prices stay elevated amid geopolitical tensions: Report

NEW DELHI: With the US-Iran conflict keeping global crude oil prices elevated and the Strait of Hormuz disruption pushing up metal costs, the economic research wing of Bank of Baroda sees further upside pressure on headline WPI in the coming months.

If a peace deal is not reached soon, prolonged tensions could keep fuel inflation high, while a depreciating rupee may add to import costs. Food inflation, which is still providing a cushion, may also inch up depending on the progress of the monsoon.

India’s Wholesale Price Index (WPI) inflation accelerated sharply to 8.3 per cent in April 2026, its highest level since October 2022, compared with just 0.9 per cent in April 2025 and 3.9 per cent in March 2026. The surge was driven primarily by fuel and manufactured products, even as food inflation remained relatively muted.

Fuel and power inflation jumped to a 42-month high of 24.7 per cent in April 2026, up from a contraction of 3.8 per cent a year ago and 1.1 per cent in March 2026. The mineral oil index led the rise, surging 39.5 per cent YoY against a decline of 5.6 per cent last year.

Within mineral oils, aviation turbine fuel saw a more than 100 per cent YoY increase, followed by sharp gains in naphtha, furnace oil, petrol, kerosene, and diesel. Coal inflation also edged up to 1.4 per cent from 0.1 per cent. The spike reflects a 54.2 per cent YoY rise in international crude oil prices in April 2026, worsened by rupee depreciation and escalating geopolitical tensions in the Gulf.

Manufactured products inflation climbed to 4.6 per cent, the highest since September 2022, compared with 2.6 per cent in April 2025 and 3.4 per cent in March 2026. Of the 22 sub-indices, 13 recorded faster growth, led by basic metals, machinery and equipment, textiles, chemicals, pharmaceuticals, and other manufacturing.

Aluminium prices rose 19.2 per cent YoY versus 3.9 per cent last year, while copper held steady at 15.3 per cent. Zinc inflation eased marginally to 6.3 per cent, and lead moderated to 1.1 per cent. Internationally, metal prices have risen even more sharply, with aluminium up 51.8 per cent YoY and copper up 41.1 per cent. As a result, core WPI inflation reached 5 per cent in April 2026, a 43-month high, up from 1.2 per cent a year ago and 3.7 per cent in March 2026.

In contrast, food inflation provided some relief, easing to 2.3 per cent in April 2026 from 3.3 per cent in April 2025. This was due to weak foodgrain inflation at -1 per cent YoY, led by a decline in cereals (0.3 per cent vs 3.9 per cent) and continued deflation in pulses (-4 per cent vs -5.6 per cent). Wheat inflation slowed sharply to 0.4 per cent from 7.4 per cent.

However, vegetables, milk, and eggs/meat/fish registered higher inflation. Vegetable inflation rose to 0.5 per cent from -17.2 per cent last year on a base effect, with tomatoes, ginger, cauliflower, and cabbage driving the uptick. Milk inflation increased to 2.6 per cent from 1.1 per cent, while eggs, meat and fish inflation surged to 6.7 per cent from -0.3 per cent.

The research report notes that while domestic foodgrain inflation remains weak, international prices tell a different story, with wheat up 12.6 per cent YoY in April 2026 and the pace of rice price decline slowing to -3.2 per cent from -31 per cent. This divergence could feed into domestic food prices in the months ahead. (ANI)