India’s Wholesale Price Index (WPI) inflation is expected to remain subdued at 0.5% for FY26, according to a new report by Union Bank of India. Despite moving back into positive territory, the bank estimates that core base effects, stable commodity prices, and monsoon patterns will keep wholesale inflation soft for the rest of the year.
The WPI outlook supports an environment conducive to low-cost input procurement for MSMEs, particularly in manufacturing, services, and agri-linked supply chains.
Soft inflation outlook supports real GDP growth
The report emphasizes that subdued WPI — after months of negative or near-zero levels — is helping ensure that the GDP deflator remains low, which in turn supports elevated real GVA (Gross Value Added) growth.
This means sectors like textiles, steel, chemicals, food processing, and other MSME-intensive domains can benefit from:
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Lower wholesale input costs
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Higher pricing power
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Room for operational margin improvement
Union Bank maintained its FY26 WPI projection at 0.5%, noting that core WPI is now rising for the third consecutive month — reaching 2.01% in August from 1.20% in July, driven by segments such as minerals, non-food articles, and manufactured goods.
GST reforms may impact inflation slightly
The report acknowledged that GST rationalisation, particularly on vehicles, food, and insurance, could temporarily increase inflation. It estimated:
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A potential rise of up to 130 basis points in inflation due to GST changes
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However, actual impact expected to be limited to 60 bps, assuming anti-profiteering measures stay in place
For MSMEs, this provides a dual advantage — input cost visibility and controlled end-price fluctuations, enabling better planning and supply chain consistency.
Outlook on monetary policy: space for easing remains
Union Bank anticipates that the benign inflation trend will provide the Reserve Bank of India (RBI) with space to introduce token rate cuts of 25–50 bps in H2 FY26, particularly if growth begins to moderate.
This easing may lead to:
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Lower cost of credit for MSMEs
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Increased liquidity in the system
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Renewed momentum in capex, procurement, and inventory buildup
Combined with low WPI and CPI inflation, this monetary space could support small business resilience in an increasingly globalised price environment.
Also read: Unemployment Dips to 5.1%, Women’s WPR Rises
Conclusion: Price stability offers window for MSME competitiveness
With core WPI trending up moderately and headline WPI staying soft, FY26 could be an ideal year for small and mid-sized enterprises to focus on:
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Expanding product lines
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Repricing offerings without inflationary pressure
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Building buffer inventories or export pipelines
The bank’s report concludes that price stability will act as a silent growth enabler, especially for MSMEs navigating input volatility and changing tax structures.