India’s wholesale price inflation (WPI) fell to a 14-month low of 0.39 percent in May, according to data released by the Ministry of Commerce and Industry on June 16, 2025. The inflation rate is down from 0.85 percent in April, reflecting the third consecutive month of moderation in wholesale prices.

This steady decline signals a broader disinflationary trend in the economy, supported by falling food prices, easing fuel costs, and subdued growth in manufactured goods.

WPI hits lowest since March 2024

The current WPI print is the lowest since March 2024, reinforcing the view that inflationary pressures are weakening across sectors. During the first two months of FY25, inflation remained below 1 percent, reversing the mild uptick witnessed toward the end of FY24.

According to the official data, food inflation saw a deflation of 1.56 percent in May, compared to 0.86 percent in April. Vegetables led the slide, with prices falling 21.62 percent year-on-year, deepening the deflation trend seen last month. Fuel and power also witnessed a deflation of 2.27 percent, compared to a 2.18 percent rise in April.

Manufactured products posted positive inflation of 2.04 percent, but this was lower than the 2.62 percent recorded in April, indicating continued softening in input and output costs.

CPI also drops to near six-year low

The sharp moderation in WPI follows the Consumer Price Index (CPI) inflation drop to 2.82 percent in May, marking a six-year low. The combined cooling in both retail and wholesale inflation offers a favourable backdrop for monetary easing.

The Reserve Bank of India (RBI), which primarily targets CPI while framing its monetary policy, responded with a 50 basis point repo rate cut earlier this month, bringing the key policy rate down to 5.5 percent. The central bank had earlier trimmed the rate by 25 bps each in February and April 2025, making the cumulative rate cut 1 percentage point since January.

Rate cuts likely to continue

The RBI’s Monetary Policy Committee (MPC) has now signalled a dovish policy stance, with analysts expecting more rate cuts in the second half of 2025 if disinflation continues.

Reflecting its confidence, the RBI has revised its inflation forecast for FY26 to 3.7 percent, down from 4 percent projected earlier. This indicates that the central bank is anticipating stable pricing conditions, which could support credit growth and economic expansion.

What economists say

Economists tracking the economy have welcomed the sustained easing in inflation, terming it as an opportunity for policy-driven growth revival.

"The moderation in both CPI and WPI is broad-based, and if global commodity prices remain contained, India can look forward to more accommodative policies," said Radhika Rao, economist at DBS Bank.

Analysts also pointed out that lower inflation will reduce pressure on household budgets, improve rural purchasing power, and allow the government to cut fuel subsidies without impacting headline inflation significantly.

Policy implications

The sharp drop in inflation comes at a time when the government is ramping up infrastructure spending ahead of the Union Budget 2025-26. With inflation under control, the fiscal authorities will have greater flexibility to maintain a growth-oriented stance without stoking price pressures.

The RBI's focus will now be on ensuring financial stability, while monitoring monsoon trends and global oil prices, which remain critical risk factors for the inflation outlook.

Conclusion

India’s wholesale inflation dropping to 0.39 percent in May 2025, the lowest in over a year, signals a decisive shift in the economic landscape. With retail and wholesale inflation both easing, the stage is set for a sustained period of monetary easing, which could spur consumption, investment, and growth in the coming quarters.

The moderation provides relief to consumers and producers alike, and gives policymakers room to support the economy, as long as disinflationary trends persist.

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