Softening of WPI inflation to propel economy on higher growth path: Economists

New Delhi: The continued softening of wholesale price index (WPI) inflation since December 2024 is a positive signal for higher economic growth in India, economists said on Monday, adding that they expect WPI inflation to remain benign in the coming months, assuming geopolitical tensions abate.

The annual rate of inflation based on the WPI eased further to a 14-month low of 0.39 per cent in May this year from 0.85 per cent in April and 2.05 per cent in March, according to the Ministry of Commerce and Industry data.

PHDCCI President Hemant Jain said this was largely driven by a significant reduction in the prices of primary articles, fuel and power, as well as manufactured product categories.

“This downtrend in wholesale inflation will boost business sentiment as it will result in reduced costs of production,” he added.

The fall in prices of food articles from (-)0.86 per cent to (-)1.56 per cent, petrol from 7.70 per cent to (-)8.49 per cent, and manufactured products from 2.62 per cent to 2.04 per cent from April to May, respectively, are significantly contributing to the softening of WPI inflation.

ICRA’s senior economist Rahul Agrawal said that aided by a favourable base, the WPI inflation expectedly flattened further to a 14-month low of 0.4 per cent in May 2025 from 0.9 per cent in April 2025, printing somewhat lower than ICRA’s estimate (+0.7 per cent) for the month.

“The cooling was broad-based, with the food, non-food manufacturing, minerals, and fuel and power segments contributing to the dip in the headline print between these months. Notably, the WPI food inflation print slumped to 1.7 per cent in May 2025, the lowest in 19 months, amid the subdued sequential uptick in prices,” he added.

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 annual inflation rate in June (until June 15) compared to May, partly aided by a favourable base.

“Given these trends, ICRA expects the WPI-food inflation to soften further in June 2025 from 1.7 per cent in May 2025,” he noted.

IANS