Published: June 16, 2025
Key Highlights:
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WPI inflation eases to 0.39% in May, lowest since March 2024
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Food inflation drops to 19-month low (1.7%), manufacturing at 7-month low
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CPI inflation also at 6-year low (2.82%), signaling broad disinflation
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RBI cuts repo rate to 5.5%, more reductions expected in 2025
India’s wholesale price inflation (WPI) fell for the third straight month to 0.39% in May 2025, its lowest level in 14 months, as per government data released on June 16. The decline was led by cooling food prices, lower manufacturing costs, and stable fuel rates, reinforcing expectations of further monetary easing by the RBI.
Breaking Down the WPI Numbers
1. Sector-Wise Inflation Trends
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Food Inflation: Slowed to 1.7% (19-month low) due to moderate vegetable and cereal prices.
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Primary Articles: Deflation of 2% (first in nearly two years).
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Manufactured Goods: Seven-month low inflation, crucial as they account for 64% of WPI weightage.
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Fuel & Power: Remained stable, with global crude prices under control.
2. Retail Inflation (CPI) Also Declines
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CPI dropped to 2.82% in May, a six-year low, with food inflation below 1% (first time since 2021).
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Core inflation (excluding food & fuel) at 2.5%, indicating broad-based disinflation.
Why Is Inflation Cooling?
✅ Favorable Base Effect (lower prices compared to last year)
✅ Normal Monsoon Expectations (boosting farm output)
✅ Stable Global Commodity Prices (crude, metals, and food imports)
✅ RBI’s Tight Monetary Policy Earlier (now being relaxed)
RBI’s Response: Rate Cuts & Future Outlook
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June 2025: 50 bps rate cut (Repo rate now at 5.5%).
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FY25 Total Cuts: 100 bps reduction (from 6.5% to 5.5%).
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FY26 Inflation Forecast Revised Down: 3.7% (from 4%).
Economists Expect:
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More rate cuts in 2025 if inflation stays benign.
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WPI to average 1.5% in FY26, staying below RBI’s comfort zone.
What Does This Mean for the Economy?
✔ Lower Borrowing Costs: Home loans, business credit to get cheaper.
✔ Boost for Consumption: Increased disposable income for households.
✔ Corporate Profit Margins: Input costs stabilizing for manufacturers.
Risks Ahead:
⚠ Geopolitical Tensions (oil price volatility)
⚠ Unpredictable Monsoon (food inflation risks)
⚠ Global Trade Slowdown (export-dependent sectors)
Expert Views
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Rahul Agrawal (ICRA):
“WPI inflation cooled due to broad-based moderation in food, fuel, and manufacturing prices.” -
Rajani Sinha (CareEdge):
“FY26 WPI may average 1.5%, but global factors need monitoring.”
Market & Policy Implications
📉 Bond Yields Likely to Fall Further (rate cut expectations)
📈 Equity Markets Positive (lower rates support growth stocks)
🏦 RBI May Shift Focus to Growth (if inflation remains subdued)
Conclusion: A Relief, But Caution Remains
The back-to-back decline in WPI and CPI inflation is a welcome sign for India’s economy, giving the RBI room to support growth. However, external shocks and monsoon performance will dictate whether this trend sustains.