WPI inflation falls to 14 month low in May 2025 on food fuel

India’s wholesale inflation dropped to a 14-month low of 0.39% in May, down from 0.85% in April, according to official data released by the Ministry of Commerce and Industry on Monday. The decline in the Wholesale Price Index (WPI) is primarily attributed to falling prices of key food staples such as vegetables and pulses, along with a continued dip in energy costs.
Wholesale food inflation slipped to 1.7% in May the lowest in 19 months as vegetable prices fell sharply by 21.6% year-on-year, marking the steepest decline since February 2023. Pulses also witnessed a notable year-on-year drop of 10.4%, the sharpest since October 2018. Cereal inflation moderated to a 44-month low of 2.6%, reflecting the positive impact of strong rabi and kharif crop output.“The outlook for food inflation has improved considerably. Factors such as the India Meteorological Department’s forecast of an above-normal monsoon, reduced import duties on edible oils, and healthy reservoir levels are expected to keep food prices stable,” stated Rajani Sinha, Chief Economist at CareEdge Ratings. However, she also noted that the uneven distribution of rainfall remains a key risk, with a 31% cumulative rainfall deficit recorded so far.
Core inflation  which excludes food and fuel eased to a five-month low of 0.8% in May, indicating broad-based cooling of price pressures in the wholesale economy.
On the energy front, fuel and power prices declined by 2.2% year-on-year in May. Wholesale energy prices saw a steeper 12.4% contraction — the ninth consecutive month of decline driven by subdued global commodity prices. However, this trend hasn't yet translated into lower retail prices of petrol and diesel, which continue to be affected by taxes and distribution costs.“Energy prices have dropped in the global market, but the ongoing geopolitical tensions, particularly the conflict between Israel and Iran, have introduced fresh risks to the inflation outlook,” noted Paras Jasrai, Associate Director at India Ratings and Research. “If crude oil prices rise above the $75 per barrel mark due to an escalation in the conflict, wholesale inflation could reaccelerate.”
Despite external uncertainties, easing wholesale prices are reflected in the retail market as well. According to data from the National Statistics Office, India’s Consumer Price Index (CPI) inflation fell to a 75-month low of 2.82% in May, with retail food inflation softening to 0.99%. Retail vegetable prices in May were down 13.7% year-on-year, while pulses were cheaper by 8.2%.Analysts say the declining inflation trend, both at wholesale and retail levels, provides some room for policymakers to support growth without being constrained by price pressures in the near term. However, they caution that any disruption in the monsoon or spike in global energy prices could reverse the current disinflationary momentum.

(Business Correspondent)