DC Edit | Retail Inflation Fall A Breather

The Consumer Price Index-based (CPI) retail inflation has cooled down to a six-year low of 2.10 per cent in June, the lowest since January 2019, giving relief to households grappling with persistent price pressures over the past few years.

The decline in the price rise was contributed mainly by the steep fall in food inflation, which plunged to a negative growth of 1.06 per cent, signalling a year-on-year deflation in food prices. Deflation means a fall in prices, affecting the profit margins of the producer, and in this case, farmers.

A drastic fall in price was seen for vegetables (-19 per cent), pulses (-11 per cent), and meat and fish (-1.6 per cent). The sharp 205-basis-point fall from the previous month underscores both a favourable base effect and improved supply conditions.

The Reserve Bank of India (RBI) aims to maintain the inflation rate between two per cent and six per cent. The easing retail inflation and deflationary trend in whole prices and food prices could help the Central bank to lower the repo rate to boost consumption in the economy, after watching the demand and supply scenario and global developments by the year-end.

The core inflation, which excludes food and energy, however, remains a concern as it rose slightly to 4.5 per cent in June 2025 because of sticky inflation in education (4.37 per cent), health (4.43 per cent), transport and communication (3.9 per cent), and housing (3.24 per cent).

Similarly, some high-frequency indicators do not appear promising. GST collections expanded at the slowest pace in 50 months at 6.2 per cent, indicating cooling demand. Car sales to dealers dropped to an 18-month low, while electricity demand continues to stay in the negative zone. On the whole, the current scenario appears to reflect soft demand, which could soon show up in the economic growth rate. The government, therefore, needs to boost consumption to stabilise inflation and strengthen the economic growth rate.