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India’s retail inflation, measured by the Consumer Price Index (CPI), declined to 2.1 percent in June 2025—the lowest since January 2019—driven by a steep fall in agricultural commodity prices following a bumper kharif and rabi crop output. The annual rate of headline CPI inflation dropped by 72 basis points in June 2025, compared to 2.82 percent in May 2025. In June 2024, retail inflation stood at 4.81 percent.
Sources: Ministry of Statistics & Programme Implementation, and Polymerupdate Research
Note: CPI = Consumer Price Index, CFPI = Consumer Food Price Index
Wholesale inflation, as measured by the Wholesale Price Index (WPI), slipped into negative territory at (-)0.13 percent in June 2025—the steepest decline in two years—due to a sharp drop in food article prices. In comparison, WPI inflation was recorded at 0.39 percent in May 2025, down from 0.85 percent in April 2025.
CPI decline
The Ministry of Statistics & Programme Implementation said in its latest report, “Year-on-year inflation rate based on All India Consumer Price Index for the month of June 2025 over June 2024 stood at 2.1 percent (provisional). There is decline of 72 basis points in headline inflation of June 2025 in comparison to May 2025. It is the lowest year-on-year inflation after January 2019.”
The substantial decline in June CPI brings India’s April-June quarter inflation to 2.7 percent which works out to lower than the Reserve Bank of India’s estimates of 2.9 percent for the same period. But, given the upward trajectory expected in the coming months, this benefit may not be significant in the overall scheme of things and the RBI forecast will be within range. Consequently, this number will not have any impact on the policy decision and hence a status quo can be expected in the ensuing Monetary Policy Committee (MPC) meeting.
Madan Sabnavis, Chief Economist, Bank of Baroda, commented, “The main reason for inflation coming down is that food article with weight of 46 percent registered a drop of 0.20 percent. This came over a high base of 8.4 percent. Additionally, negative inflation for vegetables and pulses with a weight of around 10.5 percent in the index contributed to this decline in June.”
However, inflation for edible oils and fruits remains high and that for clothing and footwear, and housing noticed virtually unchanged while of fuel and light came down marginally. The miscellaneous category registered high inflation of 5.5 percent. Within this segment, two services, education and health had inflation of 4.4 percent each which is a case of Passover of higher cost.
The personal effects picture is quite significant and contributed to higher core inflation of 4.4 percent. Gold and jewellery had high inflation due to higher bullion prices. Items like hair oil, creams, shampoos etc. registered higher inflation as producers have been passing on higher cost of inputs in prices. Transport and communication also had inflation of 3.9 percent.
Meanwhile, a detailed analysis reads that rural inflation has tended to be lower than urban due to higher share of food products. The state wise picture shows high variation in inflation which varied from (-)0.9 percent in Telangana to 6.7 percent in Kerala. This is indicative of varying food prices due to logistics costs. Such variation is symptomatic of varying food prices due to producing and consuming states being apart.
Sources: Union Ministry of Commerce and Industry, and Polymerupdate Research
Subdued food prices
The Ministry of Statistics & Programme Implementation showed year-on-year inflation rate based on All India Consumer Food Price Index (CFPI) for the month of June 2025 over June 2024 at (-)1.06 percent (provisional). Corresponding inflation rates for rural and urban are (-) 0.92 percent and (-)1.22 percent, respectively. A sharp decline of 205 basis points is observed in food inflation in June 2025 in comparison to May 2025. The food inflation in June 2025 indicates the lowest level after January 2019.
Rajani Sinha, Chief Economist, Care Ratings Ltd, said, “In the food basket, there was deflation in key items such as vegetables, pulses, spices, and meat. Looking ahead, food inflation is likely to remain contained, supported by healthy agricultural activity and a favourable base. Good progress of monsoon, adequate reservoir levels and strong kharif sowing bodes well for agricultural output and food price stability. Close monitoring of the monsoon’s spatial and temporal distribution will remain crucial.”
Meanwhile, the increase in core inflation to 4.4 percent is not worrying as it is not broad based and is mainly attributed to double-digit inflation in personal care items. On the external front, while global commodity prices are broadly expected to remain benign, intermittent spikes in inflation cannot be ruled out in midst of geopolitical conflicts. With food inflation remaining muted and demand side pressure on inflation contained, average CPI inflation is expected to remain at 3.5 percent for FY2025-26. The RBI has already front loaded the rate cuts anticipating moderation in inflation, hence Sinha does not expect further rate cuts, unless economic growth weakens materially.
WPI turns negative
India’s WPI inflation slipped into deflationary territory, contracting by 0.13 percent, largely due to deflation in food as well as fuel and power. Data released by the Ministry of Commerce and Industry showed India’s WPI at (-)0.13 in June versus 0.39 percent in May. This marked the first negative reading since the beginning of the year. The negative rate of inflation in June 2025 is primarily due to decrease in prices of food articles, mineral oils, manufacture of basic metals, crude petroleum & natural gas, etc. WPI-based inflation has been steadily easing since March and hit a 14-month low of 0.39 percent the previous month.
Rahul Agrawal, Senior Economist, Icra Ratings Ltd, said, “The WPI surprisingly reverted to a year-on-year (yoy) deflation in June 2025 after a gap of 19 months, printing at (-)0.1 percent as against expectation of +0.8 percent for the month. This was largely led by prices of food items, which declined by 0.3 percent after witnessing an inflation of 1.7 percent in the previous month, amid softer prints for fruits and vegetables, pulses, cereals, spices, and edible oils. Among the non-food items, the deflation in fuel and power also widened between these months, exerting downward pressure on the headline print”.
Notably, the core WPI (non-food manufactured items) inflation inched up marginally to 1 percent in June 2025 from 0.9 percent in May 2025, while remaining subdued. The seasonal sequential uptick in food prices has been relatively modest in July 2025 so far, which is expected to keep food print in the deflationary zone, unless there is an unusual surge in such prices in the remaining part of the month, especially for vegetables.
Besides, international crude oil prices have also eased somewhat in the ongoing month from the peak seen in June 2025, amid cooling tensions in West Asia, while remaining in the deflationary territory on a yoy basis. Further, the USD/INR pair has also remained range bound so far. Overall, Icra expects the headline WPI to remain in the deflationary territory in July 2025 despite an unfavourable base, amid the sustained yoy deflation in food and crude oil prices.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
