El Nino Effects, Oil Price Volatility to Exacerbate Inflation Print

New Delhi economists warn that oil-price volatility and El Nino effects will keep pressure on imported commodities, food prices, and headline Wholesale Price Index (WPI) during August-September.

According to Sonal Badhan, Economist at Bank of Baroda, higher insurance costs and strengthening El Nino will contribute to the elevated inflation print. The effect of El Nino is expected to get stronger in August-September period, which will also maintain pressure on food inflation and headline WPI.

The headline WPI was 9.8 per cent in July, while output PPI rose by 9.6 per cent versus (-) 0.5 per cent last year. Food inflation remains a major driver, with fruits, milk, eggs, and meat products all exhibiting upside pressures. Within fuel inflation, mineral oil index remains on the higher side, with crude petroleum, natural gas, ATF, LPG, Lube oils all rising notably.