India’s wholesale price index (WPI) inflation fell by 1.21% year-on-year in October 2025, reversing a modest 0.13% rise in September.
This marks a sharp deflationary reading, driven largely by food and fuel price falls. For example:
- Wholesale food prices fell by 5.04% year-on-year in October.
- Vegetable prices plunged 34.97% year-on-year in October.
- Fuel and power prices were down 2.55% in October.
- Manufactured goods inflation slowed to 1.54% from 2.33% in September.
Why this drop happened
Base effect & strong declines in key components
- A high base from the previous year amplified the fall in year-on-year terms.
- Large declines in food items (especially vegetables) significantly weighed on the index.
- Fuel & power remained in deflation, helping overall wholesale inflation go negative.
Weak demand and subdued pricing pressure
- The slower growth in manufactured goods suggests weaker pricing power or softer demand in parts of the economy.
- With wholesale inflation turning negative, input costs for many sectors may be easing, but that may also reflect weak demand rather than pure cost improvement.
What it means for policy and the economy
For monetary policy
- A negative WPI reading signals very low input-price inflation, which could give the Reserve Bank of India (RBI) room to consider more accommodation, especially if retail inflation also remains low.
- However, central banks often look at retail (CPI) inflation and core inflation rather than just wholesale. The retail inflation in India also recorded a historic low in October of 0.25%. Reuters
For businesses & sectors
- For manufacturing and processing firms: Input costs may ease, improving margins if sales remain robust.
- For agriculture/food sectors: Sharp falls in wholesale food prices may squeeze farmers or agri-supply participants, unless compensated by higher volumes.
- For exporters/importers and companies with global supply chains: Lower domestic wholesale inflation may make Indian producers more competitive, but currency, global demand and cost structure still matter.
For the economy
- Deflation signals caution: While lower prices can benefit consumers, persistent deflation can discourage investment, production and wage growth.
- Consumer inflation being very low suggests inflation is not yet a concern, but very low inflation also raises questions about demand strength.
- For GDP growth calculation: A smaller inflation deflator (output prices) means that real GDP growth may appear higher even if nominal growth is moderate—careful interpretation needed.
Risks & what to watch
- Temporary vs structural: Is the fall in wholesale prices a one-off due to seasonal/food effects or part of a broader structural trend?
- Spill-over to CPI: If wholesale deflation becomes persistent, it might feed into lower consumer prices or weaker inflation expectations.
- Commodity price reversal: Global commodity price shocks, supply disruptions (especially in food) could reverse the trend quickly.
- Demand weakness: If the drop in inflation is due to demand collapse rather than benign cost side, then growth risks emerge.
- Corporate margins: If cost inputs decline but prices also fall, margin pressures remain. Also, deflation can lead to inventory losses and deferred investment.
Bottom line
The headline fall of wholesale inflation to −1.21% in October 2025 is a significant signal: input price pressures in India have eased markedly, especially in food and fuel. This gives breathing space to policy makers and businesses alike. However, it also raises questions about demand strength and whether this trend will persist. For investors, companies and policymakers, the key will be monitoring how this reflects in consumer prices, corporate profitability and overall economic activity in the coming months.
