India’s retail inflation drops to six-year low of 2.82% in May, driven by steep fall in food prices and RBI’s monetary easing.
New Delhi: or the first time in six years, consumer retail inflation in India cooled to its lowest level, dipping to 2.82 per cent in May aided by a sharp moderation in the prices of food items, including vegetables, fruits, and protein-rich items etc. The reason for the decline in inflation is mostly due to a significant easing in food inflation, which was at 0.99 per cent in May, down from 8.69 per cent in the year-ago month, the government data showed on Thursday.
The data comes just days after the Reserve Bank of India’s (RBI) monetary policy panel cut the repo rate by 50 basis points to 5.5 per cent, which was the third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move of the central bank, however, signals a possible pivot from inflation curb to supporting growth in the country.
As per the data by the National Statistics Office (NSO), the year-on-year inflation rate based on all India CPI for May 2025 over May 2024 is 2.82 per cent (provisional). “There is a decline of 34 basis points in headline inflation of May 2025 in comparison to April, 2025. It is the lowest year-on-year inflation after February 2019, while it was 3.16 per cent in April and 4.8 per cent in May 2024,” the data showed.
The NSO data further showed that food inflation in May 2025 is the lowest since October 2021. “Year-on-year inflation rate based on all India CFPI for the month of May 2025 over May 2024 is 0.99 per cent (provisional). Corresponding inflation rates for rural and urban areas are 0.95 per cent and 0.96 per cent, respectively. A sharp decline of 79-basis point is observed in food inflation in May 2025 in comparison to April 2025,” it showed.
“The significant decline in headline inflation and food inflation during the month of May 2025 is mainly attributed to a decline in inflation of pulses & products, vegetables, fruits, cereals & products, households goods & services, sugar & confectionary and egg and the favourable base effect,” the NSO said.
Economists and analysts, however, look forward to a further softening of headline inflation in the coming months due to the government’s policy reforms. “The government has reduced the import duty on edible oils effective end-May 2025, which would lead to a softening in prices going forward, thereby auguring well for the oils and fats inflation readings through the fiscal, which would also be suppressed by a high base,” said Aditi Nayar, chief economist & head, (research & outreach), ICRA Ltd.
ICRA also expects the CPI-food and beverages inflation to ease further in June 2025, supported by a favourable base. “This is expected to pull down the headline CPI inflation print to 2.5 per cent in the month. Looking ahead, on a YoY basis, as many as 17 of the 22 food items recorded a lower YoY inflation in June 2025 (until June 10, 2025) vis-à-vis May 2025, barring most edible oils and tea,” Nayar added.
