This downward trajectory comes on the heels of a significant dip in retail inflation as well — Consumer Price Index (CPI) fell to a near six-year low of 2.82%, highlighting a broader cooling of inflationary pressures.
🔍 What’s Driving the Drop?
According to Rahul Agrawal, Senior Economist at ICRA Ltd., the decline is broad-based, with multiple segments contributing to the softer headline numbers:
- WPI food inflation fell to 1.7%, its lowest in 19 months
- Non-food manufacturing, minerals, and fuel & power sectors also saw declines
- Primary articles inflation dipped below 2%, the steepest fall in nearly two years
- Manufactured goods inflation hit a 7-month low, important given they make up two-thirds of the WPI basket
This is not an isolated event. The entire FY24 saw relatively subdued inflation, and despite a mild early uptick in FY25, price levels have remained consistently below the 3% mark.
💹 Policy Impact: RBI Eases the Grip
The inflation relief has given the Reserve Bank of India (RBI) room to shift gears. The Monetary Policy Committee (MPC) has already responded with:
- A 50 bps rate cut in June, following two earlier 25 bps cuts in February and April
- The repo rate now stands at 5.5%, down a full percentage point since the start of 2025
Economists believe further rate cuts may be on the table, provided the disinflation trend continues.
📈 What’s Next?
The RBI has already revised its FY26 inflation forecast down to 3.7% (from 4%), and WPI inflation is projected to average around 1.5% for the same period.
However, experts caution that global trade dynamics and geopolitical developments will be key variables to watch.
📌 Bottom Line:
India’s cooling wholesale and retail inflation in 2025 is a promising signal for businesses, consumers, and policymakers alike. If current trends hold, the stage is set for a more flexible and growth-oriented monetary environment in the coming months.
