India’s WPI Inflation Drops to 14-Month Low of 0.39% in May

New Delhi – India’s wholesale inflation, measured by the Wholesale Price Index (WPI), dropped to a 14-month low of 0.39% in May, down from 0.85% in April and 2.05% in March, according to data released by the Ministry of Commerce and Industry on Monday.

On a month-over-month basis, WPI inflation showed a negative change of -0.06% in May compared to April, indicating a continued downward trend in prices.

This decline was largely driven by lower prices of food items and fuels, including petrol and diesel, which contributed to the overall month-on-month deflation.

At the same time, retail inflation, based on the Consumer Price Index (CPI), fell to 2.82% in May—the lowest since February 2019—as per data released last week.

Food inflation also eased significantly to 0.99% in May, marking its lowest level since October 2021. This is the seventh consecutive month of declining food inflation, supported by improved agricultural output.

The Reserve Bank of India (RBI) has responded to the easing inflationary pressures by revising its inflation forecast for 2025–26 downward, from 4% to 3.7%, RBI Governor Sanjay Malhotra said on Friday.

In light of the sustained decline, the RBI reduced the repo rate by 50 basis points, bringing it down from 6% to 5.5%, in a move aimed at stimulating economic growth.

Additionally, the Cash Reserve Ratio (CRR) was reduced by 100 basis points—from 4% to 3%—to be implemented in four tranches of 25 bps each. This measure is expected to infuse ?2.5 lakh crore into the banking system, enhancing liquidity and supporting increased credit flow.

Governor Malhotra noted that inflation has significantly softened over the past six months, falling from above the RBI’s tolerance band in October 2024 to well below the target in recent months. He expressed confidence that inflation would not only stay aligned with the 4% target but could even undershoot it in the coming year.

With inputs from IANS