“India Enters FY26 with Softest Inflation in Years; WPI Likely to Stay Below 1%,” says Vikram Kasat, Head of Advisory, PL Capital

Mumbai, 14th May – With inflation cooling across wholesale and retail indices, the Indian economy appears poised for a stronger consumption revival in FY26. Backed by bumper food arrivals, a stronger rupee, and lower global energy prices, both CPI and WPI data for April 2025 point to a sustained easing in price pressures.

“Muted global commodity prices, a stronger INR, and a broad-based food retreat are driving a deeper disinflation cycle. We expect wholesale inflation to remain below 1% in the near term, creating space for rate cuts,” said Vikram Kasat, Head of Advisory, PL Capital.

WPI Slips to 13-Month Low

India’s Wholesale Price Index (WPI) inflation eased to 0.85% in April, down sharply from 2.05% in March, marking the lowest print in over a year. This mirrors the softening seen in CPI, which plunged to 3.16%, a near six-year low.

The deceleration in WPI was broad-based:

CPI Falls to 6-Year Low as Food Prices Tumble

Retail inflation, measured by Consumer Price Index (CPI), fell to 3.16% YoY in April — its lowest since July 2019. The sharp drop was primarily food-driven:

• Vegetables fell -11% YoY, their sharpest swing in six months.
• Pulses declined -5.2%, and cereals rose 5.4%, but the latter moderated ~260 bps over six months.
• Combined, these accounted for over 60% of the CPI disinflation impulse.

The inflation drag was further helped by a 6% gain in the rupee’s REER and an 11% drop in Brent crude since January, easing input and import costs.

Rate Cut on the Horizon?

With inflation now running well below the RBI’s 4% target, PL Capital sees room for monetary easing in FY26.

• Sub-3% CPI in May–June due to strong agri supply and favora    ble base effects.
• FY26 inflation tracking near 3.5–3.6%, even after factoring in tariff hikes and services creep.
• 50 bps repo rate cut likely in FY26 as real policy rates exceed 200 bps.

“The inflation narrative has decisively shifted from supply shocks to price-level moderation. This strengthens the case for an early rate cut,” Kasat noted.

The Bottom Line

India’s latest inflation data reveals the strongest disinflationary trend since the pandemic, with both the Consumer Price Index (CPI) and Wholesale Price Index (WPI) easing sharply. This creates a favorable macroeconomic backdrop that supports lower interest rates, stronger rural and discretionary consumption, and increased policy space to bolster growth.

If the monsoons perform as expected and global prices remain stable, India has the potential to maintain inflation below 4% through FY26, providing a significant tailwind for both the economy and financial markets.