India’s Wholesale Price Index (WPI) based inflation slipped into negative territory in June 2025, recording a deflation of -0.13%, according to data released by the Ministry of Commerce and Industry on Monday.
This is the first time this year that WPI inflation has fallen below zero.
The decline comes on the back of falling food and fuel prices, which pulled down wholesale inflation to a 14-month low. In May, WPI inflation stood at 0.39%.
Food & fuel prices drive deflation
The data shows that food item prices fell by 0.26%, while fuel and power costs dropped by 2.68% in June compared to the same period last year.
This broad-based decline led to a downward shift in the overall wholesale inflation rate, turning it negative for the month.
The drop in inflation reflects the broader softening of price pressures across key sectors of the economy.
Retail inflation also eases
India’s Consumer Price Index (CPI), which reflects retail inflation, also fell to 2.82% in May, marking the lowest level since February 2019.
The steady decline in retail prices complements the fall in wholesale inflation, indicating a broader trend of easing inflationary pressures.
RBI responds with policy rate cuts
The Reserve Bank of India has responded to the falling inflation by revising its inflation forecast for 2025–26 downward, from 4% to 3.7%.
RBI Governor Sanjay Malhotra recently confirmed this outlook, citing sustained moderation in price levels.
With this improved inflation scenario, the RBI has implemented a 50 basis point cut in the repo rate, reducing it from 6% to 5.5%, in a bid to stimulate growth.
Additionally, the Cash Reserve Ratio has been reduced by 100 basis points, from 4% to 3%. This will be executed in four tranches of 25 basis points each, potentially injecting around ₹2.5 lakh crore into the banking system and boosting liquidity.
The RBI Governor highlighted that inflation has consistently softened over the past six months, falling from above the upper tolerance band in October 2024 to well below the central bank’s 4% target.
With the current trend, he suggested inflation might undershoot the target during the year.
These developments have given the RBI policy space to adopt a softer monetary stance aimed at stimulating credit growth, supporting investment, and bolstering overall economic recovery.
India now faces a favourable window to balance inflation management with growth, as both wholesale and retail price indices show signs of sustained moderation.
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