Food deflation deepens; onions, potatoes, vegetables see sharp price fall

The fall in WPI inflation is in line with expectations after GST rates were reduced on September 22. Representational Pic

Wholesale price inflation dropped to a 27-month low of (-) 1.21 per cent in October, driven by a sharp deflation in food items such as pulses and vegetables, as well as lower prices of fuel and manufactured goods, government data showed on Friday.

WPI-based inflation stood at 0.13 per cent in September and 2.75 per cent in October last year.

"The negative rate of inflation in October 2025 is primarily due to a decrease in prices of food articles, crude petroleum and natural gas, electricity, mineral oils, and basic metal manufacturing," the industry ministry said in a statement.

According to the WPI data, deflation in food articles rose to 8.31 per cent in October, compared to 5.22 per cent in September, with onions, potatoes, vegetables, and pulses seeing significant price declines.

In vegetables, deflation hit 34.97 per cent in October, up from 24.41 per cent in September. Pulses saw deflation of 16.50 per cent, while potatoes and onions recorded declines of 39.88 per cent and 65.43 per cent, respectively.

In manufactured products, inflation eased to 1.54 per cent, from 2.33 per cent in September. Fuel and power saw deflation of 2.55 per cent, compared to 2.58 per cent in September, marking a decline for the seventh consecutive month.

"Looking ahead, a favourable base effect for the rest of FY26 is expected to keep the wholesale index in deflation. Consequently, Ind-Ra anticipates wholesale deflation in November 2025 to remain under 1 per cent," said Paras Jasrai, Associate Director at India Ratings and Research.

The fall in WPI inflation is in line with expectations after GST rates were reduced on September 22. GST on mass-consumption items was lowered as part of tax rationalisation, reducing the earlier four-tier structure to just two slabs, 5 per cent and 18 per cent.

These tax cuts, combined with a favourable base effect, have helped pull down both wholesale and retail inflation.

Data released last week showed retail inflation falling to an all-time low of 0.25 per cent in October, driven by GST reductions and last year's high base. In September, consumer price inflation stood at 1.44 per cent.

The Reserve Bank of India (RBI), which tracks retail inflation, kept benchmark policy rates unchanged at 5.5 per cent last month.

The decline in both retail and WPI inflation is expected to increase pressure on the RBI to consider an interest rate cut in the next monetary policy meeting scheduled from December 3 to 5.

However, Jasrai noted that based on current economic growth trends, the case for monetary easing is not very strong. FY26 retail inflation is now projected to fall to around 2.5 per cent.

"Still, to prevent the economy from slipping into sluggish and weak growth, the RBI may opt for a 25-50 basis point cut in the repo rate during its December 2025 policy review," he added.

PHDCCI CEO and Secretary General Ranjeet Mehta said the chamber expects WPI inflation to remain range-bound due to benign crude oil prices, adequate food-grain buffer stocks, and a healthy kharif harvest.

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