Mar-25 WPI inflation lower at 2.05%, as food basket moderates

16 Apr 2025 , 10:43 AM

MARCH WPI INFLATION MODERATES TO 2.05%

The good news is that there was some relief on WPI inflation, which fell from 2.38% to 2.05% in March 2025. This is the lowest level since September 2024. However, the January 2025 WPI inflation was also revised up by 20 bps from 2.31% to 2.51%. While food products and fuel contributed to lowering WPI inflation, the pressure came from manufactured products, amidst the global tariff uncertainty. Manufacturing inflation trended above the 3% mark, showing signs that supply chains are once again getting stretched.

Month	WPI Inflation (%)	CPI Inflation (%)
Mar-24	0.26%	4.85%
Apr-24	1.19%	4.83%
May-24	2.74%	4.80%
Jun-24	3.43%	5.08%
Jul-24	2.10%	3.60%
Aug-24	1.25%	3.65%
Sep-24	1.91%	5.49%
Oct-24	2.75%	6.21%
Nov-24	2.16%	5.48%
Dec-24	2.57%	5.22%
Jan-25	2.51%	4.26%
Feb-25	2.38%	3.61%
Mar-25	2.05%	3.34%

Data Source: Office of the Economic Advisor

There was little contribution from the base effect, with most of the moderation in WPI inflation coming from falling food and mineral prices. However, the break-up of WPI inflation is more interesting. While there was a clear tapering in food inflation and fuel inflation, the pressure from manufactured products continues in March too.

In fact, manufacturing WPI inflation has gone up by 21 bps from 2.86% in February to 3.07% in March 2025. That is not surprising, considering that global tariff uncertainty is hitting manufacturing hardest. A more illustrative picture can be seen in the cumulative full year inflation for FY25, which stands at 2.25% versus -0.73% in FY25.

READING WPI INFLATION FY25 TREND

Let us look at smoothened WPI inflation on a full year FY25 basis.

• The headline WPI inflation for FY25 stood at 2.25%, compared to -0.73% in comparable FY24. This is due to the fact that in fiscal year FY24, 8 out of the 12 months had reported contraction in WPI.
• The primary articles WPI for FY25 at 5.13% is sharply higher than the corresponding FY24 figure of 3.54%. This has been triggered by manufacturing WPI inflation turning around from -1.69% last year to 1.71% in FY25. It has the highest 64.23% weightage.
• Let us turn to the Energy Basket. This basket saw WPI inflation hardening from -4.70% to -1.30%; albeit still in contraction mode. In FY25, the pressure came from a spike in LPG and high speed diesel (HSD) prices.
• What about food and non-food baskets? While the primary basket did harden in FY25, the food basket hardened from 6.61% to 7.30%. At the same time, pressure came from the non-food basket which hardened from -5.64% to -0.42%.

The pressure on the manufacturing basket is fairly pronounced in the last quarter, although food basket is keeping the WPI inflation under check.

WPI INFLATION SHIFTS: YOY AND MOM

Let us first look at how the WPI inflation basket across primary products, fuel & power, and manufacturing products shifted in last 3 months. This inflation is year-on-year.

Commodity Set	Weight	Mar-25 WPI	Feb-25 WPI	Jan-25 WPI
Primary Articles	0.2262	0.76%	2.81%	4.58%
Fuel & Power	0.1315	0.20%	-0.71%	-1.87%
Manufactured Products	0.6423	3.07%	2.86%	2.65%
WPI Inflation	1.0000	2.05%	2.38%	2.51%
Food Basket	0.2438	4.66%	5.94%	7.52%

Data Source: Office of the Economic Advisor

Here are some key observations. While the food basket tapered in the month of March, the fall was much sharper in the overall primary articles basket. Fuel & Power turned around compared to last month, despite softer Brent Crude prices. Pressure from manufacturing basket continues to linger. Let us turn to the high frequency MOM data.

Commodity Set	Weight	Mar-25 WPI	Feb-25 WPI	Jan-25 WPI
Primary Articles	0.2262	-1.07%	-1.63%	-2.12%
Fuel & Power	0.1315	-0.91%	1.18%	0.13%
Manufactured Products	0.6423	0.42%	0.28%	0.28%
WPI Inflation	1.0000	-0.19%	-0.13%	-0.45%
Food Basket	0.2438	-0.11%	-1.31%	-2.30%

Data Source: Office of the Economic Advisor

The short term pressures is essentially also coming from manufacturing; while the energy and the primary basket are holding WPI inflation down.

WPI BASKET – BIG SWING FACTORS IN MARCH 2025

Swing factor are drivers that trigger the shift in WPI. The left hand side (LHS) looks at positive drivers; while right hand side (RHS) looks at negative drivers for WPI (product-wise).

Commodity	WPI Inflation	Commodity	WPI Inflation
Vegetable Oil	30.95%	Vegetables	-15.88%
Onions	26.65%	Crude Petroleum	-11.50%
Fruits	20.78%	Crude & Natural Gas	-7.64%
Food Products	10.67%	Potatoes	-6.77%
Wheat	7.96%	Petrol	-3.86%
Cereals	5.49%	Pulses	-2.98%
Paddy	3.88%	High Speed Diesel (HSD)	-2.88%
Minerals	2.84%	Cement, Lime, Plaster	-2.01%
Paper Products	2.39%	Non-metallic Minerals	-0.30%
Tobacco Products	2.21%

Data Source: Office of the Economic Advisor

Most of the upward pressure on WPI inflation is still coming from food and primary products basket; actually 8 out of the 10 swing products. Among others, there is tobacco products and paper products. However, the WPI inflation depressants are more interesting. 4 out of the 10 inflation depressants are from the fuel & energy segment, while 3 are from the food basket. Manufacturing, which used to play a big part in bringing down inflation, is moving the other side. That is the key insight.

WHAT WE READ FROM WPI DATA FOR MARCH 2025

A few swallows do not a summer make; but we are seeing signs of WPI inflation and CPI inflation finally starting to converge. It is clearly food that is bringing about this sync. While the CPI inflation continues to be a critical input for monetary policy, the WPI inflation is a critical input for fiscal policy. In the last one year, there are signs that higher WPI inflation was causing pressure on corporate margins and depressing performance. It remains to be seen if that trend can now be decisively reversed!