India’s Wholesale Price Index (WPI) inflation for May 2025 has shown a significant decline, easing to a 14-month low of 0.39% (provisional) on a year-on-year (YoY) basis.
This is a notable drop from the 0.85% recorded in April 2025 and 2.05% in March 2025, continuing a downward trend for the third consecutive month.
Here’s a breakdown of the key factors contributing to this decline:
- Falling Food Prices: This is the primary driver of the cooling WPI inflation.
- Vegetable prices saw a sharp contraction of 21.62% in May, compared to 18.26% in April.
- Onion inflation eased significantly to 14.41% in May, from 0.20% in April.
- Potato inflation stood at a deflation of (-)29.42%.
- Pulses inflation also fell to 10.41% compared to 5.57% in April.
- Overall, the WPI Food Index inflation cooled to 1.72% in May from 2.55% in April.
- Contraction in Primary Articles: Inflation in this component, which includes food articles, minerals, and crude petroleum & natural gas, contracted by 2.02% in May, from a growth of 1.44% in April.
- Deflation in Fuel & Power: The inflation rate for this category fell deeper into negative territory, contracting by 2.27% in May compared to a contraction of 2.18% in April. This suggests lower prices for items like petrol, diesel, and LPG.
- Easing Manufactured Products Inflation: While still showing inflation, the rate for manufactured products, which accounts for over 60% of the WPI basket, grew at a slower pace of 2.04% in May, down from 2.62% in April.
- WPI Core Inflation (excluding food and fuel) also eased to 0.9% from 1.5% a month earlier.
Implications:
- Positive for Consumers and Economy: Lower wholesale inflation eventually translates to lower retail prices, which is good for consumers’ purchasing power.
- RBI Monetary Policy: While the Reserve Bank of India (RBI) primarily focuses on Consumer Price Index (CPI) for its monetary policy decisions, a consistent cooling of WPI inflation provides a broader positive trend. It offers more headroom for the RBI to maintain or even consider further accommodative stances if CPI also remains subdued. Notably, retail inflation also eased to a six-year low of 2.82% in May, and the RBI recently cut the repo rate by 50 basis points.
Overall, the May 2025 WPI data indicates a healthy and sustained moderation in wholesale price pressures in the Indian economy.