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Oil Volatility, El Nino to Pressure Imported Commodities and WPI
In India, the prices that shops and businesses pay for goods are going up fast.
In July, wholesale prices were almost 10 percent higher than a year earlier.
Economists think prices may keep rising in August and September.
One reason is that oil prices are going up and down a lot because of tension between the United States and Iran.
Two important sea routes where ships carry oil are risky right now.
Because of this, shipping goods costs more, and paying for insurance on ships costs more too.
That makes things brought from other countries more expensive.
El Nino is a weather pattern that can cause hot, dry weather, which can hurt food supplies in India.
Prices of milk, eggs, fruits, meat, and fuel are all going up, which makes life more expensive for everyone.
Economists expect oil-price volatility, higher insurance and freight costs, and a strengthening El Nino to keep pressure on imported commodities, food prices and headline WPI.
India's headline WPI stood at 9.8% in July, with food, fuel and manufactured products all driving the elevated inflation.
Global crude prices were about 21% higher year-on-year in July and 26.5% higher by August on geopolitical tensions.
Fuel and power inflation rose 20% YoY in July, moderating from 27.4% in June, led by a 32.4% rise in mineral oil.
Food inflation remains a major driver, with fruits, milk, eggs and meat products all showing upward price pressure.
- Who
- Economists, including Sonal Badhan of Bank of Baroda, analysing India's wholesale inflation trends.
- What
- A forecast that oil-price volatility, higher insurance and freight costs, and strengthening El Nino effects will keep pressure on imported commodities, food prices and headline WPI.
- Where
- India (New Delhi), with risks centred on the Strait of Hormuz and Bab al-Mandeb Strait.
- When
- Reported for July, with the outlook covering August-September.
- Why
- Because of diminishing hopes of a US-Iran peace deal, threats to key shipping routes, rising freight and insurance costs, and a strengthening El Nino.
Key facts
- Headline WPI (July)
- 9.8%
- Output PPI (July)
- 9.6% vs -0.5% a year ago
- Fuel and power inflation (July)
- 20% YoY, moderating from 27.4% in June
- Mineral oil inflation (July)
- 32.4% YoY
- Crude petroleum and natural gas inflation
- 27% YoY
- Global crude prices
- About 21% higher YoY in July; 26.5% higher YoY by August
- Threatened key waterways
- Strait of Hormuz and Bab al-Mandeb Strait
- El Nino timing
- Expected to strengthen in August-September
Quotes
Sonal Badhan
Economist at Bank of Baroda
“Higher cost of insurance will add to the total freight cost, which in turn will pose upside pressures on imported commodities. Also, the effect of El Nino is expected to get stronger in August-September period. This will also maintain pressure on food inflation and headline WPI”
thehansindia.com
Sources
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