CHENNAI: India's wholesale price inflation, as measured by the Wholesale Price Index (WPI), declined to a 14-month low of 0.39% in May 2025, down from 0.85% in April. This marks the lowest rate since March 2024, when it stood at 0.26% .
Here is an analysis of the key factors that caused this significant drop.
The decline in WPI inflation was primarily driven by a sharp decrease in food prices. The food articles index saw a year-on-year increase of 1.72% in May, a deceleration from 2.55% in April.
Notably, vegetable prices plummeted by 21.62%, a steeper decline compared to the 18.26% fall in April. Prices of pulses, potatoes, and onions also experienced significant drops, contributing to the overall easing of food inflation.
Additionally, inflation in manufactured products slowed to 2.04% in May from 2.62% in April, indicating a moderation in price pressures within the manufacturing sector. Fuel and power prices decreased by 2.27%, slightly more than the 2.18% decline observed in April .
Implications
According to economists and market experts, the easing of wholesale inflation aligns with the Reserve Bank of India's (RBI) ongoing efforts to manage price stability. With retail inflation also declining to 2.82% in May, the lowest in over six years, the RBI may consider this favorable data in its future monetary policy decisions.
Economists anticipate that the continued moderation in inflation could lead to further rate cuts by the RBI, potentially up to 25 basis points later in the year, depending on the trajectory of inflation and economic growth .
The decline in WPI inflation, driven by falling food and fuel prices, suggests a positive trend towards price stability in the Indian economy. However, sustained monitoring of global commodity prices and domestic agricultural output will be crucial in assessing the future inflationary landscape.