Is the Softening of WPI Inflation a Sign of Economic Growth?
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Synopsis
Economists reveal that the ongoing decline in WPI inflation since December 2024 heralds a new era of economic growth for India. With expectations of continued low inflation, the business climate looks promising, contingent on global stability. Explore how these trends may shape India's economic future.
Key Takeaways
- WPI inflation has reached a 14-month low, signaling potential economic growth.
- Reduction in prices of primary articles, fuel, and manufactured goods is driving this trend.
- Continued low inflation could boost business confidence.
- 20 out of 22 food items reported a decline in inflation rates.
- ICRA anticipates further easing of food inflation in June 2025.
New Delhi, June 16 (NationPress) The ongoing decline in wholesale price index (WPI) inflation since December 2024 signals a positive trend for economic growth in India, economists stated on Monday. They anticipate that WPI inflation will stay low in the upcoming months, provided that geopolitical tensions ease.
The yearly inflation rate based on WPI dropped to a 14-month low of 0.39 percent in May this year, down from 0.85 percent in April and 2.05 percent in March, as reported by the Ministry of Commerce and Industry.
PHDCCI President Hemant Jain noted that this decline is primarily due to a marked reduction in the costs of primary articles, fuel, power, and various manufactured goods.
"This downward trend in wholesale inflation will enhance business confidence, leading to lower production costs," he remarked.
The drop in prices of food articles from (-)0.86 percent to (-)1.56 percent, petrol from 7.70 percent to (-)8.49 percent, and manufactured products from 2.62 percent to 2.04 percent from April to May are crucial factors contributing to the easing of WPI inflation.
Senior economist Rahul Agrawal from ICRA mentioned that, supported by a favorable base, WPI inflation is expected to further decline to a 14-month low of 0.4 percent in May 2025, compared to 0.9 percent in April 2025, which is slightly below ICRA’s forecast of (+0.7 percent) for the month.
"The cooling trend was widespread, with food, non-food manufacturing, minerals, and fuel and power sectors all contributing to the decrease in the headline figure. Notably, the WPI food inflation rate fell to 1.7 percent in May 2025, the lowest seen in 19 months, amidst a muted sequential price increase," he added.
Out of 22 food items monitored by the Department of Consumer Affairs, 20 reported a decline in their annual inflation rate in June (up to June 15) compared to May, aided partly by a favorable base.
"Given these patterns, ICRA projects that WPI food inflation will further decrease in June 2025 from 1.7 percent in May 2025," he concluded.
Point of View
I firmly believe that the recent decline in WPI inflation is a critical indicator of India’s economic resilience. This trend, if sustained, could pave the way for increased investments and better consumer confidence, ultimately fostering a more robust economy.
NationPress
16/06/2025
Frequently Asked Questions
What is WPI inflation?
WPI inflation refers to the rate of price change in the wholesale market, reflecting the cost of goods before they reach consumers.
Why is the decline in WPI inflation significant?
A decline in WPI inflation can lead to reduced production costs, boosting business confidence and potentially stimulating economic growth.
What factors contribute to WPI inflation?
WPI inflation is influenced by various factors, including the prices of raw materials, fuel, and manufactured goods.
How does WPI inflation impact consumers?
While WPI inflation primarily affects wholesale prices, changes can eventually impact consumer prices, affecting purchasing power.
What are economists predicting for the future of WPI inflation?
Economists expect WPI inflation to remain low in the coming months, contingent on global stability and reduced geopolitical tensions.
