With input costs expected to remain elevated this year, even after the Strait of Hormuz reopens, manufacturers will continue to face higher costs, a Crisil report said on Wednesday, adding that in the domestic market, with demand holding up so far, there is room to pass on the costs to consumers and support margins.
Consequently, inflation based on the Consumer Price Index (CPI), particularly core CPI, could witness an upward pressure in the coming months, the report mentioned.
While WPI will be the first to reflect the inflation pressure, rising input costs are soon expected to percolate into consumer prices.
In fiscal 2026, WPI inflation was just 0.7 per cent, while non-food WPI stood at 1.1 per cent.
However, some critical inputs used in manufacturing experienced price pressures even in the last fiscal. Copper prices rose 8.7 per cent on average in fiscal 2026, while aluminium prices were up 6.5 per cent, both exceeding their decadal inflation average of 7.8 per cent and 5.4 per cent, respectively.
In April 2026, overall WPI inflation rose to 8.3 per cent (from 3.9 per cent in March), with non-food WPI surging to 10.9 per cent (up from 4.7 per cent).
Based on the clustered WPI categories, copper prices surged 17.3 per cent, aluminium 20.6 per cent, crude oil-related 49.3 per cent and gas-related 19.1 per cent in April, the report mentioned.
The ratio stood at 1.02, driven by 6.2 per cent on-month rise in input prices, while output prices went up by a modest 0.7 per cent.
The report further stated that input costs rose sharply due to higher energy prices, particularly for crude petroleum, natural gas and mineral oils, along with higher manufacturing costs for steel, basic chemicals, fertilisers, plastics, synthetic rubber, man-made fibres, plastic products, non-ferrous metals, other non-metallic mineral products.
Crisil's input-output ratio, based on the Wholesale Price Index (WPI), crossed the 1.0 mark in April after remaining below it for 44 straight months. The last time the input-output ratio had crossed the 1.0 mark was in March 2022 after the outbreak of the Russia-Ukraine conflict and remained so for five months.
"The West Asia conflict has sparked the largest oil shock the world has seen so far. The closure of the Strait of Hormuz has only broadened the shock to other input categories even as manufacturers are already grappling with higher costs from critical inputs such as copper and aluminium," the report noted.
