WPI inflation declines to 14-month low of 0.39 per cent in May on easing food, fuel prices

Wholesale inflation fell to 0.39% in May due to lower food and fuel prices. However, rising crude oil prices and monsoon delays may push inflation up slightly in June. Retail inflation remains low, supporting RBI’s recent interest rate cut

New Delhi: Wholesale price inflation (WPI) declined to a 14-month low of 0.39 per cent in May on easing prices of food articles and fuel, and experts said geopolitical tensions could push up prices.

WPI-based inflation was 0.85 per cent in April. It was 2.74 per cent in May last year. In a statement, the industry ministry said the inflation in May is in the positive zone primarily due to “an increase in prices of manufacture of food products, electricity, other manufacturing, chemicals and chemical products, manufacture of other transport equipment and non-food articles”.

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According to the WPI data, food articles saw a deflation of 1.56 per cent in May, against a deflation of 0.86 per cent in April, with vegetables, onion, potato and pulses seeing negative inflation.

Deflation in vegetables was 21.62 per cent in May, compared to 18.26 per cent in April. Fuel and power, too, saw a deflation of 2.27 per cent in May, compared to a 2.18 per cent inflation in April.

Manufactured products, however, saw positive inflation at 2.04 per cent, compared to 2.62 per cent in April. The Reserve Bank of India (RBI) mainly takes into account retail inflation while formulating monetary policy.

Data released last week showed retail inflation eased to over six-year low of 2.82 per cent in May, mainly due to subdued food prices. The RBI this month cut benchmark policy interest rates by a sharp 0.50 per cent to 5.50 per cent amid easing inflation.

The RBI has cut inflation projections for the current fiscal year to 3.7 per cent from the earlier estimate of 4 per cent, as it expects core inflation to remain benign with the easing of international commodity prices.

The sub-4 per cent average retail inflation projection is the lowest in recent years. ICRA Senior Economist Rahul Agrawal said the cooling in WPI was broad-based, with the food, non-food manufacturing, minerals, and fuel and power segments contributing to the dip in headline print between these months.

Notwithstanding the early onset of the southwest monsoon, its progress halted in early June, with a significant lag of 31 per cent over the normal levels up to June 15, 2025. The temporal and spatial distribution of the monsoon remains key for crop outlook, and consequently, food inflation, Agarwal said.

ICRA said crude oil prices have risen quite sharply in the ongoing month, following the escalation of tensions between Israel and Iran. The price of the Indian basket of crude oil has averaged 4.3 per cent higher on a month-on-month basis during June 1-13 after contracting continuously since February. Moreover, the extent of the year-on-year deflation in such prices has also narrowed in the month, relative to May 2025.

“Higher crude oil prices, along with some depreciation in the INR relative to the USD, would impart upward pressure on the WPI inflation print for June 2025, which is nevertheless likely to remain benign around 0.6-0.8 per cent in June 2025,” Agarwal said. Industry chamber PHDCCI said the downtrend in wholesale inflation will boost business sentiment as it will result in reduced costs of production.