Assessment of inflation driven construction material cost escalation using market prices and wholesale price index data

Inflation-driven fluctuations in construction material, fuel, and labour costs continue to undermine cost certainty in building projects. Most existing studies emphasize cost forecasting using indices, with limited validation against actual market prices and insufficient attention to material-specific inflation sensitivity. This study examines the impact of inflation on the rising cost of cement, steel, fuel, and labour and examines the congruence between the trends in WPI and market prices. Market survey data of Kolhapur, India were integrated with WPI data (2020–2024). Annual average indices and percentage deviations were calculated, and Spearman’s rank correlation analysis was performed in JASP. Results show that there are strong positive correlations between inflation and each of the major construction cost elements. Spearman’s ρ values indicate strong positive monotonic associations (ρ = 0.800–1.000), but p-values are non-significant (p > 0.05 except for fuel at p = 0.083) due to the limited sample size (n = 5), reflecting descriptive trends rather than robust statistical inferences. Fuel (diesel) has the highest inflation sensitivity followed by cement and steel, while labour costs show constant regulated inflation. Market prices are more short-term volatile than WPI indices that reflect long-term trends at the cost of failing to reflect short- term shocks in the markets. The results suggest the shortcomings of using aggregate indices of inflation alone for estimating cost. Integrating market prices with official indices and implementing material-specific escalation strategies can aid in significantly more accurate budgeting, risk management, and costing approaches for inflation-affected construction projects.