India’s wholesale inflation drops to 14-month low in May

New Delhi: According to provisional data, India's wholesale price index-based inflation fell to a 14-month low of 0.39% in May, down from 0.85% in the previous month.

A favourable base aided the drop in the annual rate of inflation based on the All India Wholesale Price Index (WPI), with the food, non-food manufacturing, minerals, and fuel and power segments contributing to the dip in the headline print.

The wholesale price index (WPI), a proxy for producers' prices, stood at 2.25% in March, 2.38% in February and 2.51% in January, data released by the ministry of commerce and industry on Monday said.

The latest wholesale inflation came in below expectations, with prices rising less than the 0.8% projected by economists in a Reuters poll.

Falling food prices drive moderation

According to economists, lower food prices led the moderation, with wholesale food inflation falling to 1.72% in May.

The decline was also mirrored across non-food manufacturing, minerals, and fuel and power, which collectively dragged down the headline number.

"As many as 20 of the 22 food items for which data is released by the Department of Consumer Affairs, reported an easing in their YoY inflation rate in June 2025 (until 15 June) compared to May 2025, partly aided by a favourable base," said Rahul Agrawal, Senior Economist, Icra Ltd. 

"Given these trends, ICRA expects the WPI-food inflation to soften further in June 2025 from 1.7% in May 2025," Agrawal added.

Meanwhile, expectations of a normal monsoon and a rebound in rabi sowing have raised hopes of improved agricultural output, potentially easing food prices further in the coming months.

Primary articles decline

Data showed prices of primary articles, which comprise food items such as cereals, vegetables, eggs, meat and fish, as well as non-food articles such as crude petroleum and natural gas declined year-on-year, with inflation in this category slipping to negative territory.

Pulses saw negative inflation of 10.41% year-on-year, vegetables saw 21.62%, and potatoes recorded 29.42%. 

In May, non-food article prices rose 1.53%, while crude petroleum and natural gas fell 12.43%. Fuel and power prices declined 2.27%, and manufactured goods saw a 2.04% rise.

"On the macroeconomic front, CPI inflation has also been easing in recent months, gradually strengthening the case for a more accommodative stance by the RBI and raising the possibility of deeper rate cuts than we currently anticipate in the second half of the year," said Sankar Chakraborti, MD & CEO, Acuité Ratings & Research Limited.

"Looking ahead, while the current inflation trajectory is a welcome development, volatility in global markets and economies and unpredictable weather patterns due to El Niño remain the risks to be monitored," Chakraborti added.

To be sure, India's retail inflation cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released last week.

Consumer price index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed.

This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.

Meanwhile, earlier in June, the Reserve Bank India's (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.

Regulating interest rates is a key instrument for the central bank to control inflation.

A higher interest rate regime makes borrowing costs more expensive, which can reduce demand among banks, other financial institutions and even the general public to borrow money.

Reducing the supply of money in the market can also bring down consumer spending.