India's Retail Inflation Hits 6-Year Low at 2.1% in June, Economists See Further Cooling

India’s retail inflation, measured on the basis of Consumer Price Index, declined to 2.1% in June 2025 - lowest after January 2019, according to the latest official data released on Monday. In May, the CPI-based inflation stood at 2.82% and 5.08% in June 2024.

“Year-on-year inflation rate based on All India Consumer Price Index (CPI) for June 2025 over June 2024 is 2.10% (provisional). There is a decline of 72 basis points in the headline inflation of June 2025 in comparison to May 2025. It is the lowest year-on-year inflation after January 2019,” the statement read.

The last time inflation dipped this low was in January 2019, when it touched 1.97%. The National Statistical Office (NSO) stated that the sharp drop in both headline and food inflation in June 2025 can largely be attributed to favourable base effect and falling prices across key food categories, including vegetables, pulses, meat, fish, cereals, etc.

Aditi Nayar, chief economist of ICRA said the cooling was entirely by the food and beverages (F&B) segment, which witnessed a deflation of 0.2% after a gap of 75 months. “This was led by softer prints for 11 of the 12 sub-groups, including a widening deflation in vegetables, pulses, spices, meat, and fish”.

While food prices have witnessed a seasonal sequential uptick in July 2025 so far, Nayar said the extent of the same has been relatively benign compared to that seen in the year ago month – especially in the case of vegetables.

“This is expected to lead to a further dip in the F&B inflation print in July 2025, unless there is an unusual spike in vegetable prices in the latter part of the month. ICRA expects the headline CPI inflation to recede further and bottom out at 1.9% in July 2025, despite an unfavourable base,” she added.

On the other hand, Sankar Chakraborti, MD & CEO of Acuité Ratings & Research Limited projected that headline CPI inflation will remain under 3.5% until December 2025, with the firm’s FY26 inflation forecast revised down to 3.5% from 3.8%, assuming normal monsoon conditions.

However, ICRA remains watchful of the episodes of heavy rainfall and flooding across some states in the remaining part of the monsoon season that could damage crops already down and consequently impact food prices.

“We expect the Q2 FY2026 print to materially undershoot the MPC’s current forecast of 3.4% amid the benign outlook for July 2025 (~1.9%), which is likely to prompt the MPC to cut its FY2026 CPI inflation projections further from 3.7% currently,” it added.

Kotak Mahindra Bank chief economist Upasna Bhardwaj expects the RBI to maintain a pause in the coming 1-2 meetings and remain watchful of the transmission ahead along with global uncertainties.