WPI Declines to 27-Month Low as GST Cuts Take Effect

Wholesale Price Inflation (WPI) in India has fallen to a 27-month low of (-1.21 percent) for October 2025. This decline is attributed primarily to significant drops in the prices of essential food items, including pulses and vegetables, alongside a decrease in fuel and manufactured goods prices. According to data released by the Government of India on Friday, WPI inflation stood at 0.13 percent in September 2025 and 2.75 percent in October 2024.

The Ministry of Industry highlighted that the negative inflation rate was largely driven by declining prices in various categories, such as food articles, crude petroleum, natural gas, electricity, mineral oils, and basic metals. Specifically, food articles experienced a deflation of 8.31 percent in October, compared to 5.22 percent in September. Notably, vegetables saw a dramatic deflation rate of 34.97 percent, while pulses and other staples like potatoes and onions also experienced substantial price reductions.

Prices for pulses dropped by 16.50 percent, with potatoes and onions recording deflation rates of 39.88 percent and 65.43 percent, respectively. In the manufactured goods sector, inflation decreased to 1.54 percent from 2.33 percent in the previous month. Fuel and power also reflected negative inflation of 2.55 percent, marking seven consecutive months of decline.

Looking ahead, a favorable base effect is anticipated to maintain the WPI in deflation for the remainder of fiscal year FY26. Paras Jasrai, Associate Director at India Ratings and Research, indicated expectations for WPI deflation in November 2025 to remain below 1 percent. This trend follows recent changes to the Goods and Services Tax (GST) rates, which were lowered starting September 22, 2025, as part of a strategy to rationalize taxes. The adjustments simplified the tax structure from four tiers to two slabs of 5 percent and 18 percent.

The impact of these GST cuts has been significant, contributing to a drop in both wholesale and retail inflation. Recent data indicate that retail inflation reached an all-time low of 0.25 percent in October 2025, down from 1.44 percent in September. The Reserve Bank of India (RBI), which monitors retail inflation, maintained its policy rate at 5.5 percent during its last meeting.

The decline in both retail and WPI inflation raises the possibility of a rate cut by the RBI at its upcoming policy review scheduled for December 3-5, 2025. Despite this, Jasrai noted that the case for monetary easing may not be robust, given the current economic growth trends. The expected retail inflation for FY26 is projected to stabilize around 2.5 percent.

In light of these developments, Ranjeet Mehta, Chief Executive Officer and Secretary General of the PHD Chamber of Commerce and Industry (PHDCCI), expressed confidence that WPI inflation will remain stable. Contributing factors include low international crude oil prices, adequate buffer stocks of food grains, and a healthy kharif harvest, all of which are expected to support the economic landscape moving forward.