India's wholesale price inflation continued its upward trend for the second month in a row. Government data released on Wednesday showed the Wholesale Price Index (WPI) recorded a 0.83 percent increase in December 2025. This positive figure follows two months of deflation earlier in the year.
Key Drivers of Inflation
The Ministry of Industry attributed the positive inflation rate primarily to rising prices in several sectors. These include other manufacturing, minerals, machinery and equipment manufacturing, food products manufacturing, and textiles. The statement highlighted these areas as significant contributors to the overall increase.
Detailed Sectoral Analysis
Food articles showed a deflation of 0.43 percent in December. This was a notable improvement from the 4.16 percent deflation seen in November. Vegetables experienced a deflation of 3.50 percent, a sharp reduction from the 20.23 percent deflation recorded in the previous month.
Manufactured products saw their inflation rate climb to 1.82 percent in December. This was up from 1.33 percent in November 2025. The non-food articles category registered an inflation of 2.95 percent, compared to 2.27 percent in the prior month.
Fuel and power sectors continued to experience negative inflation. Deflation in this category stood at 2.31 percent in December, slightly higher than the 2.27 percent recorded in November.
Retail Inflation Context
Earlier data released this week indicated that retail inflation also increased. It inched up to 1.33 percent in December from 0.71 percent in November. Rising food prices were the main driver behind this uptick in consumer prices.
RBI's Monetary Policy Stance
The Reserve Bank of India has been actively adjusting its policy in response to inflation trends. In the current fiscal year, the RBI has reduced policy interest rates by 1.25 percentage points. This move came as inflation remained at relatively low levels.
Last month, the central bank significantly lowered its inflation projection for the current fiscal year. It now estimates inflation at 2 percent, down from an earlier projection of 2.6 percent. The RBI cited rapid disinflation in the economy as the reason for this revision.
The Reserve Bank primarily tracks retail inflation when making decisions about benchmark interest rates. In its most recent policy review, the RBI cut key policy rates by 25 basis points to 5.25 percent. Officials described the Indian economy as being in a "rare Goldilocks period," characterized by high growth alongside low inflation.
Economic Growth Outlook
The RBI has raised its GDP growth projection for FY26 to 7.3 percent. This represents an increase from the earlier estimate of 6.8 percent. Recent quarterly data supports this optimistic outlook.
India recorded an impressive 8.2 percent growth in the September quarter. The June quarter showed a growth rate of 7.8 percent. These strong numbers indicate robust economic performance despite inflationary pressures.
The return to positive wholesale inflation after months of deflation suggests changing economic dynamics. Policymakers will likely monitor these trends closely as they balance growth objectives with price stability concerns.
