At first glance, India’s inflation data for June 2025 appears to be a triumph of economic management. The headline retail inflation rate, measured by the Consumer Price Index (CPI), has fallen to 2.1 per cent, the lowest in over six years. Accompanied by a deflationary Wholesale Price Index (WPI) reading of -0.13 per cent, it suggests a cooling economy, stable prices, and a potential window for further monetary easing by the Reserve Bank of India (RBI). But while the data offers comfort to policymakers, it doesn’t reflect the complex reality that many households continue to face. The primary reason for this disinflationary trend is a dramatic fall in food prices. On a year-on-year basis, vegetable prices fell by 19 per cent, pulses by nearly 12 per cent, and cereals inflation touched a 41-month low. The Consumer Food Price Index (CFPI) turned negative for both rural and urban India. Rural food inflation stood at -0.92 per cent, while in urban areas, it dropped to -1.22 per cent. Add to that the favourable base effect from last year’s high inflation and a good monsoon so far, and one can understand the broad-based cooling in food prices.
Beyond food, prices in several essential categories are still surging—and this divergence exposes a critical flaw in how headline inflation is calculated and understood. Items such as health care, personal care, education, and housing have all seen inflation inch upwards. Education inflation rose to 4.37 per cent, while healthcare climbed to 4.43 per cent. The personal care segment, which includes soap, shampoo, toothpaste, and sanitary products, recorded an alarming inflation rate of 14.8 per cent—its eighth month of double-digit inflation in the past nine. These are not luxuries. They are daily essentials that no household can avoid. And they are getting steadily more expensive. This rising cost burden is particularly concerning for low- and middle-income households, for whom non-food items often constitute a significant portion of spending. This brings us to a fundamental policy concern: Is the headline inflation figure truly representative of the average Indian’s lived experience?
Currently, food carries a weight of 46 per cent in the CPI basket, a legacy of older consumption patterns. But recent Household Consumption Expenditure Surveys indicate that food now makes up only about 30 per cent of household spending. In other words, inflation data is skewed. A sharp drop in food prices can drag the overall CPI down—even if every other essential item is becoming costlier. The Ministry of Statistics and Programme Implementation (MoSPI) is indeed working on updating the base year and weights, but until then, the CPI risks painting an overly optimistic picture. Moreover, core inflation (excluding food and fuel) has edged up to 4.4 per cent, driven in part by rising prices of precious metals like gold, which recorded a 35.98 per cent inflation rate in June. This may not directly impact all consumers, but it reflects broader underlying inflationary pressures that monetary policy must not ignore.
For the RBI, the dilemma is clear. The Monetary Policy Committee has already cut the repo rate by 100 basis points in 2025 to spur growth. But with the policy stance now ‘neutral’ and core inflation rising, space for further easing is limited. A premature rate cut could risk fuelling demand-push inflation in non-food sectors. For citizens, cheaper food doesn’t mean cheaper living. The inflation rate may be falling on paper, but real household budgets are still under pressure. To restore the connection between data and daily reality, we need faster statistical reforms and more nuanced public discourse. In sum, while the drop in headline inflation is welcome, it is not cause for celebration. Policymakers must resist complacency and double down on structural reforms—both in how inflation is measured and how relief is delivered.