Current Affairs - Economy

In May 2025, India’s wholesale price inflation (WPI) dropped to 0.39%, marking a significant decline from 0.85% in April. This easing was primarily attributed to substantial deflation in food prices, especially vegetables, which saw a drop of over 21%. The slowdown was also influenced by reduced prices of fuel and manufactured goods. This figure represents the lowest wholesale inflation rate in over a year and reflects a broader disinflationary trend, which is also evident in retail inflation numbers. This data is important for shaping economic and fiscal strategies, especially in managing input costs and consumer pricing trends.

In May 2025, India recorded a Consumer Price Index (CPI) inflation rate of 2.82%, marking the lowest point since February 2019. This significant drop reflects a broader trend of easing inflation across most Indian states, although some like Kerala, Punjab, and Jammu & Kashmir continued to see elevated price levels. The decline in inflation could be attributed to various macroeconomic factors including stable commodity prices, improved supply chain conditions, and effective monetary policies. Such a low inflation rate is significant for the economy as it suggests increasing price stability, which can influence interest rates, purchasing power, and overall economic planning.

The World Bank has maintained its GDP growth projection for India at 6.3% for FY2025–26, despite downgrading forecasts for 70% of global economies due to trade tensions and weak investment. India remains the fastest-growing major economy, supported by strong domestic demand, a resilient services sector, and moderating inflation. The RBI's monetary policy easing and expected fiscal consolidation further bolster this outlook. While global growth is projected at just 2.3%—the slowest since 2008 (excluding recessions)—India's steady performance highlights its economic resilience amid worldwide challenges.

The World Bank's latest report highlights India's significant achievement in reducing extreme poverty from 27.1% in 2011-12 to just 5.3% in 2022-23, using an updated poverty line of $3 per day (adjusted for inflation and purchasing power parity). This decline reflects the success of economic growth, welfare schemes (like food subsidies), and targeted poverty alleviation programs. The report also notes that 171 million people were lifted out of poverty in this period, with rural-urban gaps narrowing substantially. Despite global economic challenges, India's progress sets a benchmark for poverty reduction efforts worldwide.

The repo rate was reduced by 50 basis points to 5.5%, representing the third cut since February 2025. This move by the central bank is designed to stimulate economic growth at a time when inflation is well within the targeted range, thereby allowing for monetary easing. A 50 basis point reduction can significantly lower borrowing costs across sectors—affecting home loans, vehicle finance, and business credit. This helps encourage credit demand and boosts consumption and investment, which are key drivers of economic recovery. Such rate cuts are also vital for monetary policy transmission and support the broader macroeconomic goal of sustaining growth.