Due to the US-Iran war, the prices of crude oil remain high in the international market and the prices of metals are increasing due to the blockage in the Strait of Hormuz. In such a situation, the Economic Research Branch of Bank of Baroda believes that there may be more pressure on wholesale inflation in the coming months. If no peace agreement is reached soon, fuel inflation may remain high due to prolonged tensions, while import costs may increase further due to the weakening of the rupee.
Food inflation, which is still providing some relief, may also increase slightly depending on the progress of monsoon. India’s Wholesale Price Index (WPI) inflation rose sharply to 8.3 percent in April 2026, its highest level since October 2022. In comparison, it was only 0.9 percent in April 2025 and 3.9 percent in March 2026. This surge was mainly due to fuel and manufactured products, while food inflation remained relatively low.
Why may wholesale inflation increase?
Fuel and electricity inflation reached a 42-month high of 24.7 percent in April 2026, a decline of 3.8 percent a year ago and much higher than the level of 1.1 percent in March 2026. The mineral oil index showed the highest increase, rising by 39.5 percent this year (YoY) compared to a decline of 5.6 percent last year. Within mineral oils, aviation turbine fuel grew by more than 100 per cent YoY, followed by naphtha, furnace oil, petrol, kerosene and diesel which also recorded sharp growth. Inflation of coal also increased from 0.1 percent to 1.4 percent. This surge reflects a 54.2 percent year-on-year increase in international crude oil prices in April 2026, which has been worsened by the depreciating rupee and rising geopolitical tensions in the Gulf region.
Increase in inflation of manufactured products
Inflation of manufactured products increased to 4.6 percent, which is the highest level since September 2022. In comparison, it was 2.6 percent in April 2025 and 3.4 percent in March 2026. Of the 22 sub-indexes, 13 recorded rapid growth, with basic metals, machinery and components, textiles, chemicals, pharmaceuticals and other manufacturing sectors leading the way. Aluminum prices rose 19.2 percent year-on-year (YoY) compared to 3.9 percent last year, while copper remained stable at 15.3 percent.
Inflation of zinc came down slightly to 6.3 percent, and that of lead came down to 1.1 percent. Internationally, metal prices have increased even more rapidly. There has been a year-on-year increase of 51.8 percent in aluminum and 41.1 percent increase in copper. As a result, core wholesale inflation reached 5 percent in April 2026, which is the highest level in 43 months. This is more than 1.2 percent a year ago and 3.7 percent in March 2026.
Relief in food inflation
In contrast, there was some relief from food inflation, which declined from 3.3 percent in April 2025 to 2.3 percent in April 2026. This was due to weakness in cereal inflation (-1 per cent YoY), which was mainly contributed by decline in prices of cereals (0.3 per cent vs 3.9 per cent) and continued deflation in prices of pulses (-4 per cent vs -5.6 per cent).
Wheat inflation came down sharply from 7.4 percent to 0.4 percent. However, higher prices of vegetables, milk, and eggs/meat/fish were recorded. Due to base effect, inflation of vegetables increased to 0.5 percent from -17.2 percent last year. Tomato, ginger, cauliflower and cabbage contributed mainly to this increase. Inflation in milk increased from 1.1 percent to 2.6 percent, while inflation in eggs, meat and fish jumped from -0.3 percent to 6.7 percent.
The research report states that while domestic grain inflation remains weak, international prices tell a different story. In April 2026, wheat prices increased by 12.6 percent year-on-year, and the pace of decline in rice prices slowed to -3.2 percent from -31 percent. This difference may also impact domestic food prices in the coming months.
