Driven by softening food prices, retail inflation cools to 6-year low of 2.1pc in June

THEBUSINESSBYTES BUREAU

NEW DELHI, JULY 14, 2025

Retail inflation in India dropped sharply to a six-year low of 2.1% in June 2025, reflecting the impact of widespread monsoon and falling food prices, bringing the rate close to the Reserve Bank of India’s (RBI) comfort zone. This marks a notable decline from 2.82% in May and 5.08% in June 2024, continuing a downward trajectory observed since November 2024.

According to the National Statistics Office (NSO), this is the lowest year-on-year retail inflation recorded since January 2019, when it stood at 1.97%. A significant 72 basis points drop in headline inflation was noted between May and June 2025.

The easing of prices was largely influenced by a favorable base effect and substantial reductions in the prices of vegetables, pulses, cereals, meat, milk, sugar, and spices. Food inflation, in particular, saw a steep drop of 205 basis points, landing at (-1.06%), its lowest since January 2019.

The RBI, which targets an inflation rate of 4% ±2%, has responded with a total 100 basis points cut in the benchmark repo rate since February, in an effort to support growth amid decelerating price pressures.

Meanwhile, Wholesale Price Index (WPI)-based inflation turned negative for the first time in 19 months, contracting by 0.13% in June, against 0.39% in May and 3.43% in June 2024. The Ministry of Commerce attributed this deflation to falling prices of food articles, mineral oils, basic metals, crude petroleum, and manufactured products.

The WPI food basket reported a deflation of 3.75%, up from 1.56% in May, highlighting sharp corrections, especially in vegetable prices.

Regionally, inflation varied significantly, with Telangana recording the lowest at (-0.93%) and Kerala the highest at 6.71%. Inflation was also lower in rural areas (1.72%) compared to urban areas (2.56%), suggesting a broader rural benefit from food price declines.

With both retail and wholesale inflation cooling significantly, policymakers may find room to maintain an accommodative monetary stance, supporting economic momentum while keeping inflation risks in check.