India’s WPI inflation YoY fell to -1.21% in November 2025, marking the first significant deflationary signal since mid-2025. This contrasts with the 0.13% inflation in October and a 12-month average of approximately 0.91%. The steep decline reflects easing commodity prices and subdued demand pressures amid a complex macro backdrop.

Drivers this month

• Sharp declines in fuel and power prices contributed approximately -0.75 percentage points (pp) to the WPI drop.
• Food articles saw a mild deflationary impact of -0.20 pp, driven by seasonal harvests.
• Core manufactured goods inflation remained near zero, contributing marginally to the overall contraction.

Policy pulse

The current WPI reading sits well below the Reserve Bank of India’s (RBI) inflation comfort zone, which targets consumer inflation around 4%. Wholesale deflation signals easing input costs but may complicate monetary policy calibration, especially as CPI inflation remains sticky.

Market lens

Immediate reaction: The Indian rupee (INR/USD) strengthened by 0.30% within the first hour post-release, reflecting optimism about easing inflationary pressures. Short-term government bond yields (5-year) declined by 8 basis points, signaling expectations of a more accommodative RBI stance.

WPI inflation is a critical gauge of wholesale price movements, often preceding consumer price trends. The November print of -1.21% contrasts with the prior year’s peak of 2.38% in March 2025 and the recent low of -0.58% in August. This volatility reflects shifting commodity cycles and demand-supply imbalances.

Historical context

• February 2025 saw a WPI inflation of 2.31%, indicating a strong inflationary phase earlier this year.
• July and August 2025 marked the onset of mild deflation with -0.13% and -0.58%, respectively.
• The current -1.21% is the steepest YoY decline since at least 2023, signaling a notable shift.

Monetary policy & financial conditions

The RBI has maintained a cautious stance amid persistent CPI inflation near 5.50%. However, the wholesale deflationary trend may prompt the central bank to consider pausing rate hikes or even easing in early 2026. Financial conditions have tightened modestly, with the benchmark repo rate at 6.50%, but bond markets are pricing in a potential pivot.

Fiscal policy & government budget

Fiscal stimulus remains moderate, with the government focusing on infrastructure and rural support. The narrowing of wholesale inflation could ease input cost pressures on public projects, supporting budgetary discipline. However, slower inflation may dampen nominal revenue growth, complicating deficit targets.

What This Chart Tells Us

Market lens

Immediate reaction: The INR/USD currency pair appreciated 0.30% post-release, reflecting market relief at lower inflation. The 2-year government bond yield declined by 10 basis points, while breakeven inflation swaps for 5 years dropped 15 basis points, signaling expectations of softer inflation ahead.

Looking ahead, the WPI inflation trajectory will depend on several factors, including global commodity prices, domestic demand recovery, and policy responses. The current deflationary signal opens multiple scenarios for India’s macro outlook.

Bullish scenario (30% probability)

• Global commodity prices stabilize or decline further, sustaining wholesale deflation.
• RBI eases monetary policy in Q1 2026, boosting growth without triggering inflation.
• Fiscal prudence supports investment, leading to a gradual recovery in demand.

Base scenario (50% probability)

• WPI inflation hovers near zero, with mild volatility in fuel and food prices.
• Monetary policy remains on hold, balancing inflation risks and growth concerns.
• Fiscal policy remains supportive but cautious amid global uncertainties.

Bearish scenario (20% probability)

• Supply shocks or geopolitical tensions push commodity prices higher, reversing deflation.
• Sticky CPI inflation forces RBI to maintain or raise rates, slowing growth.
• Fiscal slippage or external shocks exacerbate inflationary pressures.

India’s WPI inflation YoY reading of -1.21% in November 2025 signals a notable easing in wholesale price pressures. While this may ease input costs and support growth, it also complicates monetary policy decisions amid persistent consumer inflation. The interplay of global commodity trends, domestic demand, and policy responses will shape the inflation outlook in the near term.

Key Markets Likely to React to WPI Inflation YoY

The WPI inflation print influences multiple asset classes sensitive to inflation and growth expectations. The Indian rupee (INR/USD) often reacts to inflation surprises, as do government bond yields. Stocks in commodity-sensitive sectors and inflation-linked instruments also track these dynamics closely.

• INRUSD – Currency pair sensitive to inflation and monetary policy shifts.
• NSEI – India’s benchmark equity index, responsive to macroeconomic shifts.
• RELIANCE – Major conglomerate with exposure to energy and commodities.
• BTCUSD – Bitcoin, often viewed as an inflation hedge and risk barometer.
• USDINR – Inverse of INRUSD, also tracks inflation-driven currency moves.

FAQ

What is WPI Inflation YoY?

WPI Inflation YoY measures the year-on-year percentage change in wholesale prices, reflecting cost pressures at the producer level.

How does WPI inflation affect monetary policy in India?

WPI inflation influences RBI’s decisions by indicating input cost trends, which can precede consumer inflation and affect interest rate policy.

Why is the recent WPI deflation significant?

The -1.21% reading signals easing wholesale price pressures, which may reduce inflation risks but also indicate weak demand or supply-side improvements.

Takeaway: The sharp fall in India’s WPI inflation to -1.21% signals easing wholesale price pressures, presenting both opportunities and challenges for policymakers navigating inflation and growth trade-offs in late 2025.