India inflation risks rise as food and fuel costs persist

Economic forecasts for India indicate rising inflationary pressures across both consumer and wholesale sectors for August. Societe Generale expects Consumer Price Index (CPI) inflation to rise to approximately 4.8% year-on-year, up from 4.4% in July. This would mark the third consecutive month above the Reserve Bank of India’s 4.0% target, suggesting that inflation is becoming more broad-based due to persistent food and fuel costs.

Simultaneously, Union Bank of India (UBI) Research estimates that Wholesale Price Index (WPI) inflation may moderate slightly to 9.34% from 9.78% in July, primarily driven by a reduction in fuel inflation. However, the wholesale outlook remains clouded by rising food prices, which are estimated to have accelerated to 8.14% from 6.64% in July.

Key drivers for these trends include elevated global commodity prices, a rainfall deficit of 14%, and lagging sowing progress. Specific food categories such as sugar, cereals, and vegetables are contributing to the upward pressure, posing risks heading into the festive season.