I have read few posts of persons talking about losing their wallet's containing BTC and couldn't recover it at all. Hence, as people keep losing their BTC due to loss of wallet seed phrase, can it affect or cause a decline in BTC supply entirely?
Lost bitcoins won't be recovered without access to lost private keys. It's impossible as from Private key to Public key then public address is one-way. You can not revert the process from Public address to Public key then Private key.
Total supply is 21M bitcoins.
Only circulating supply can be changed with new mined bitcoins and lost bitcoins. However, you won't be able to know how many bitcoins were lost.