Retail inflation eases to over 6-year low in June on subdued food prices

New Delhi: Retail inflation declined to over six-year low of 2.1 per cent in June, nearing the RBI's comfort zone, on account of subdued prices of food items, including vegetables, driven by widespread monsoon.

The Consumer Price Index-based inflation was 2.82 per cent in May and 5.08 per cent in June 2024. Inflation is on a decline since November 2024.

Year-on-year inflation rate based on CPI for the month of June 2025 over June 2024 is 2.1 per cent, the National Statistics Office (NSO) said in a statement.

“There is a decline of 72 basis points in headline inflation of June 2025 in comparison to May 2025. It is the lowest year-on-year inflation after January 2019,” it said.

The previous low of 1.97 per cent was recorded in January 2019.

The NSO said the significant decline in headline inflation and food inflation in June 2025 is mainly attributed to favourable base effect and decline in inflation of vegetables, pulses and products, meat and fish, cereals and products, sugar and confectionery, milk and products and spices.

The Reserve Bank, which has been tasked to ensure inflation remains at 4 per cent (with a margin of 2 per cent on either side), has cumulatively reduced the key short-term lending rate by 100 basis points since February in the wake of slowing retail inflation.

Meanwhile, the wholesale price inflation (WPI) turned negative after a gap of 19 months, declining 0.13 per cent in June as deflation widened in food articles and fuel, along with softening in manufactured product costs.

WPI-based inflation was 0.39 per cent in May. It was 3.43 per cent in June last year.

"Negative rate of inflation in June, 2025 is primarily due to decrease in prices of food articles, mineral oils, manufacture of basic metals, crude petroleum & natural gas etc," the industry ministry said in a statement.

As per WPI data, food articles saw a deflation of 3.75 per cent in June, as against a deflation of 1.56 per cent in May, with vegetables seeing a sharp drop.

According to the NSO data on CPI, the annual inflation in the food basket during June 2025 over June 2024 was (-) 1.06 per cent.

A sharp decline of 205 basis points is observed in food inflation in June 2025 in comparison to May 2025. The food inflation in June was also the lowest after January 2019.

The inflation rural was lower than the national average at 1.72 per cent while it was higher in urban areas at 2.56 per cent.

The lowest inflation was in Telangana (-0.93 per cent) and the highest in Kerala (6.71 per cent). On all India basis, the annual inflation was negative in vegetables (-19 per cent), 'meat and fish' (-1.62 per cent), 'pulses and products' (-11.76 per cent), and spices (-3.03 per cent).

Commenting on the CPI data, Aditi Nayar, Chief Economist, ICRA, said the cooling was entirely led by the food and beverages (F&B) segment, which witnessed a deflation of 0.2 per cent after a gap of 75 months, after printing at 1.5 per cent in the previous month.

"The CPI inflation eased for the eighth consecutive month to a softer-than-expected 2.1 per cent in June 2025 from 2.8 per cent in May 2025, touching the lowest level since January 2019. We are not ruling out the possibility of a final 25 bps rate cut in the August 2025 meeting, carrying forward the front-loading seen in June 2025," Nayar said.

Paras Jasrai, Associate Director at India Ratings and Research, said that notwithstanding the deflationary turn of food items, core inflation increased to 4.4 per cent in June 2025, the highest since September 2023.

"A closer look indicates that it was largely on account of an uptick in inflation of jewellery items. Inflation of gold increased to a 58-month high of 36 per cent (as geopolitical tensions flared up in the Middle-East), the inflation of silver and other ornaments was also at elevated levels of 17.8 per cent and 21.5 per cent, respectively, in June 2025," Jasrai said.

Garima Kapoor, Economist and Executive Vice President, Elara Capital, said the CPI inflation for June cooled to a six-year low led by moderating food prices and aided by a high base.

"We expect full year CPI inflation to remain below RBI's full year estimate of 3.7% and hence do not rule out the possibility of another rate cut post-end of monsoon," Kapoor said.

The NSO collects the price data for CPI from selected 1,114 urban markets and 1,181 villages covering all States/UTs.