El Nino and Oil Price Volatility to Weigh on Import Commodities

Oil price volatility and strengthening El Nino effects are expected to put pressure on imported commodities in August and September, according to economists. Higher insurance and freight costs will add to the total cost of imports, which may lead to higher food prices and a rise in headline Wholesale Price Index (WPI).

The WPI was 9.8 per cent in July, with all major group heads - including food, fuel, and manufactured products - contributing to the elevated inflation print.

Fuel inflation rose 20 per cent year-on-year (YoY) in July, while mineral oil inflation rose 32.4 per cent YoY. Global crude prices were around 21 per cent higher YoY in July and had risen 26.5 per cent YoY till August due to geopolitical tensions.