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India’s Wholesale Price Index (WPI) inflation is expected to have fallen to 2% in February 2025, down from 2.3% in January, driven by a drop in oil prices and a seasonal decline in food prices, according to a report by Union Bank of India (UBI).

The report noted that the primary factor behind the moderation in WPI inflation was the sharp decline in vegetable prices, a major component of food inflation. Vegetable prices are estimated to have dropped by 12% month-on-month, helping to ease inflationary pressures.

However, edible oil prices experienced a slight increase during the month, while manufactured food prices remained stable, with key inputs like sugar and edible oil showing only modest price rises.

The fuel index, which tracks petroleum product price changes, is expected to remain in negative territory in February after a brief uptick in the previous two months. The report attributed the decline in fuel prices to reduced global oil demand, stemming from economic concerns under the second term of U.S. President Donald Trump.

Core WPI, which excludes food and fuel, also showed signs of moderation in February. Lower global energy prices helped alleviate inflationary pressures, though a surge in metal prices limited the extent of the decline. Since over 40% of raw materials in manufacturing are imported, global commodity price changes have a direct impact on domestic inflation.

Looking ahead, UBI expects WPI inflation to continue its downward trend, supported by softening global fuel and commodity prices. Seasonal declines in food prices are also likely to contribute to lower inflation levels. However, the report cautioned that ongoing trade wars and disruptions in global supply chains could influence future price trends, which will be closely monitored in the coming months.