WPI Inflation Turns Positive: December Surge to 0.83% Sparks Rate Concerns

December WPI figures: Wholesale price inflation edges up to 0.83%

After two consecutive months in the red, India’s wholesale inflation is back—with a vengeance. The latest data from the Ministry of Commerce reveals that the WPI inflation December 2025 surged to **0.83%**, marking a decisive exit from deflation and sending ripples through financial markets . This unexpected uptick, driven by rising costs across manufacturing, food, and textiles, comes at a delicate time when the Reserve Bank of India (RBI) is weighing its next move on interest rates amid sticky retail inflation.

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December WPI Breakdown: What Pushed Prices Up?

The jump from -0.34% in November to +0.83% in December wasn’t random—it was powered by broad-based cost pressures across key segments of the economy:

  • Manufactured Products: Prices rose by 1.2% year-on-year, led by chemicals, pharmaceuticals, and basic metals .
  • Food Articles: Onion, potato, and edible oil prices spiked due to supply chain disruptions and unseasonal rains in key agricultural belts .
  • Textiles: Cotton yarn and fabric costs jumped nearly 2.5%, reflecting global raw material shortages and strong export demand .

Notably, the only major segment still in deflation was **fuel and power**, which declined by 2.1% due to stable global crude oil prices and domestic subsidies.

End of the Deflation Era? Why It Matters

India hadn’t seen negative WPI inflation since mid-2024, and the brief dip in October–November was largely attributed to base effects and falling energy costs. But sustained deflation can signal weak demand—a dangerous sign for growth. The return to positive WPI inflation December 2025 suggests underlying economic activity is picking up, especially in industrial production. However, if this trend accelerates, it could feed into higher consumer prices and erode household purchasing power.

Let’s zoom in on the sectors that shaped December’s numbers:

Sector YoY Change (%) Key Drivers
Manufacturing +1.20 Chemicals, metals, machinery
Food Articles +1.85 Onion (+42%), potatoes (+28%), pulses
Minerals +3.10 Iron ore, limestone
Fuel & Power -2.10 Crude oil, electricity subsidies
Textiles +2.45 Cotton yarn, synthetic fabrics

This data shows that while input costs are rising for manufacturers, they may struggle to pass them fully to consumers—especially in a competitive retail environment.

Impact on RBI Policy: Will Rates Stay on Hold?

The RBI has maintained a “withdrawal of accommodation” stance since early 2025, keeping the repo rate at 6.50%. But with retail (CPI) inflation also ticking up to 5.4% in December , the central bank now faces a tricky balancing act. Rising WPI often precedes CPI increases, as businesses eventually raise end prices. While the RBI doesn’t target WPI directly, persistent wholesale inflation could force it to delay any rate cuts—even if growth slows. Analysts at IMF have warned emerging economies like India to remain vigilant against second-round inflation effects .

WPI vs. CPI Divergence: A Growing Puzzle

Historically, WPI and CPI moved in tandem. But in recent years, they’ve diverged significantly—largely because CPI includes services (like healthcare and education), which WPI excludes. Currently, WPI is rising faster than CPI, suggesting producers are absorbing costs rather than passing them on. But this buffer won’t last forever. If wage pressures build or global commodity prices surge, the gap could close rapidly, triggering broader inflation. For a deeper dive, see our analysis on [INTERNAL_LINK:why-wpi-and-cpi-dont-always-match].

What This Means for Businesses and Consumers

For SMEs and MSMEs, rising input costs mean tighter margins. Many may be forced to raise prices in Q1 2026, potentially fueling a new inflation cycle. Consumers, already stretched by high food and fuel bills, could see grocery and clothing expenses climb further. On the flip side, positive WPI signals stronger industrial demand—good news for employment and investment in the medium term.

Conclusion: Inflation Is Back—But Is It Here to Stay?

The WPI inflation December 2025 figure of 0.83% is more than just a number—it’s a warning flare. While a return to positive territory reflects economic normalization, the breadth of the increase across core sectors warrants caution. The RBI will likely hold rates steady through Q1 2026, prioritizing price stability over growth stimulus. For now, India walks a tightrope between recovery and overheating—and every percentage point matters.

Sources

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