India’s wholesale inflation cooled to a 14-month low of 0.39% in May 2025, down from 0.85% in April, according to government data released on June 16. This marks the third consecutive month of decline in the Wholesale Price Index (WPI), signaling sustained easing of price pressures. Alongside this, the Consumer Price Index (CPI) dropped to a near six-year low of 2.82% in May, driven by food inflation falling below 1% for the first time in nearly four years.
Key Factors Behind the Decline
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Subdued Food Inflation: Food prices, a major driver of inflation, continued to moderate, contributing significantly to the WPI decline.
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Stable WPI Trend: Throughout FY24, wholesale inflation remained largely contained, with only a slight uptick in early FY25. It has stayed below 3% for most of the year.
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Global and Domestic Factors: Lower input costs and improved supply chains have helped keep price pressures in check.
RBI’s Response to Cooling Inflation
The consistent drop in both WPI and CPI has provided the Reserve Bank of India (RBI) with room to adopt a more accommodative monetary policy. The RBI’s Monetary Policy Committee (MPC) implemented:
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A 50 basis points (bps) rate cut in June 2025.
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Earlier cuts of 25 bps each in February and April 2025.
As a result, the repo rate now stands at 5.5%, down from 6.5% at the start of 2025. These measures aim to boost economic growth while maintaining price stability.
What This Means for Businesses and Consumers
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Lower Borrowing Costs: With the repo rate reduced, loans for businesses and individuals are becoming more affordable, potentially spurring investment and consumption.
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Stable Prices: The decline in wholesale and retail inflation ensures that essential goods remain affordable, benefiting consumers.
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Economic Growth: Easing monetary policy could stimulate sectors like manufacturing, real estate, and retail, driving job creation.
Outlook for Inflation and Policy
Analysts expect inflation to remain manageable in the near term, supported by stable global commodity prices and robust domestic supply chains. The RBI is likely to maintain a cautious yet growth-oriented approach, balancing inflation control with economic recovery.
For businesses, this is an opportune time to plan expansions or investments, leveraging lower borrowing costs. Consumers can expect continued affordability of goods and services, contributing to overall economic stability.
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