India's retail inflation, as measured by the Consumer Price Index (CPI), declined to 2.1% in June 2025, down from 2.82% in May. This marks the lowest year-on-year inflation rate since January 2019, when it stood at 2.05%. The June figure also remains below the Reserve Bank of India's (RBI) medium-term target of 4%, continuing a trend of subdued price pressures in the economy.
The decline in inflation was primarily driven by a significant drop in food prices. The Consumer Food Price Index (CFPI) turned negative, recording a -1.06% inflation rate in June, compared to 0.99% in May. This negative food inflation was observed in both rural and urban areas, with rural food inflation at -0.92% and urban food inflation at -1.22%. The decrease in food prices was attributed to favorable base effects and declines across various food categories, including vegetables, pulses, cereals, meat and fish, sugar, milk, and spices.
In rural areas, overall inflation fell to 1.72% in June, down from 2.59% in May. Urban inflation also eased to 2.56%, compared to 3.12% in the previous month. Fuel and light inflation slowed to 2.55% in June from 2.84% in May.
The RBI has revised its inflation forecast for the fiscal year 2025-26, projecting a CPI inflation rate of 3.7%, down from the previous estimate of 4%. The central bank anticipates inflation to average 2.9% in the first quarter, 3.4% in the second quarter, 3.9% in the third quarter, and 4.4% in the fourth quarter of the fiscal year.
The easing of both retail and wholesale inflation indicates a general trend of subdued price pressures in the economy, which could influence the RBI's future monetary policy decisions.