India's wholesale price inflation, as reflected by the Wholesale Price Index (WPI), fell to a 14-month low of 0.39 percent in May, according to data presented on Monday by the Ministry of Commerce and Industry. This is a sustained decline following 0.85 percent in April and 2.05 percent in March.
The month-to-month WPI inflation in May became negative, shrinking by (-) 0.06 percent from April. The reason behind this fall can be primarily attributed to decreasing food prices and fuel prices, such as petrol and diesel.
Concurrently, retail inflation—measured through the Consumer Price Index (CPI)—fell to 2.82 percent in May on a year-on-year basis. It is the lowest CPI-based inflation since February 2019, according to data released last week.
Food inflation, in particular, fell to 0.99 percent in May—the lowest since October 2021. This is the seventh consecutive month of cooling food prices, driven by growth in agricultural production.
Following the continuous decline in inflation, the Reserve Bank of India has modified its inflation prediction for the 2025–26 financial year. The estimate is now 3.7 percent, down from its previous projection of 4 percent, RBI Governor Sanjay Malhotra confirmed on Friday.
With inflation easing, the central bank opted for a growth-friendly approach in its recent review of monetary policy. It lowered the repo rate by 50 basis points, from 6 percent to 5.5 percent, to spur economic activity.
Besides this, the RBI also committed a calibrated cut in the Cash Reserve Ratio (CRR) to 3 percent from its current level of 4 percent in four equal stages of 25 basis points each. This is likely to pump in around ₹2.5 lakh crore into the banking system, increasing the liquidity and allowing more credit availability.
Governor Malhotra added that inflation decreased significantly during the last six months. "Inflation has eased substantially over the last six months from above the tolerance band in October 2024 to well below the target, with evidence of broad-based moderation," he said.
The medium and near-term perspective now provides us with the assurance of not just a sustainable convergence of headline inflation towards the 4 per cent target, as exuded at the previous meeting, but also the expectation that throughout the year, it will undershoot at the margin," the Governor furthered.
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