Daijiworld Media Network - New Delhi

New Delhi, July 14: India’s Wholesale Price Index (WPI)-based inflation slipped into the negative zone at -0.13% in June, marking the first deflationary reading of 2025 as food and fuel prices cooled, according to data released Monday by the Ministry of Commerce and Industry.

This represents a continuation of the disinflationary trend seen in recent months, with WPI inflation having fallen to a 14-month low of 0.39% in May. In June, food prices dropped by 0.26%, while petrol and diesel costs declined by 2.68% year-on-year, contributing to the overall softening.

In parallel, Consumer Price Index (CPI)-based retail inflation also eased to 2.82% in May, the lowest since February 2019, reflecting a broader cooling of price pressures across the economy.

RBI Responds with Policy Easing

Taking cues from the sharp moderation in inflation, the Reserve Bank of India (RBI) has revised its inflation forecast for 2025–26 down to 3.7%, from its earlier estimate of 4%. In its most recent monetary policy review, the RBI implemented a 50 basis point cut in the repo rate, bringing it down from 6% to 5.5%, aiming to stimulate growth and investment.

Additionally, the central bank announced a 100 basis point reduction in the Cash Reserve Ratio (CRR) — from 4% to 3%, to be rolled out in four 25 bps tranches. This move is expected to inject ?2.5 lakh crore into the banking system, enhancing liquidity and supporting credit expansion.

“Inflation has softened significantly from being above the tolerance band in October 2024 to now well below the 4% target,” said RBI Governor Sanjay Malhotra. “With broad-based moderation in price levels, we now anticipate that headline inflation may even undershoot the target marginally during the year.”

Outlook

The return of WPI inflation to negative territory, combined with subdued CPI inflation, offers the RBI policy space to maintain an accommodative stance. With borrowing costs now lower, consumers and businesses alike are expected to benefit from cheaper loans and easier access to credit, helping revive consumption and investment in the economy.

As global commodity prices remain stable and domestic supply chains normalize, the central bank appears confident in maintaining a soft monetary approach, while keeping a close eye on any inflationary risks going forward.