Inflation Hits 77-Month Low: A Big Relief for India

In June 2025, India’s retail inflation rate, measured by the Consumer Price Index (CPI), fell to 2.1%, the lowest in 77 months. This is the lowest reading since January 2019, signalling a major easing of price pressures on consumers.

Inflation is a measure of how quickly prices rise over time. When inflation is high, the purchasing power of money falls, hurting households. When it is low, families find it easier to manage their budgets.

June’s sharp drop offers hope that the cost of living crisis many Indians have been feeling may finally be easing.

Why Has Inflation Dropped So Sharply?

1. Food Prices Have Fallen

• The food and beverages category in CPI saw a 0.2% contraction in June 2025.

• This is a dramatic change from 8.4% inflation in June 2024.

• This is the eighth consecutive month that food inflation has eased.

Key food items saw prices drop:

• Vegetables

• Pulses

• Spices

• Meat

According to Rajani Sinha, Chief Economist at CareEdge Ratings, this trend is likely to continue thanks to healthy agricultural activity and a favourable base (the statistical effect of last year’s high prices).

For ordinary households, cheaper food is the most direct and welcome relief since food is a big part of monthly expenses.

2. Fuel and Light Inflation Slows

• Inflation in the fuel and light category eased to 2.55% in June, down from 2.8% in May.

• This slow growth is even more striking when compared to -3.6% in June 2024.

Fuel prices directly affect transport and energy costs and indirectly influence prices of many goods. Keeping fuel inflation low is essential for containing overall inflation.

3. Crude Oil Price Crash

• In the Wholesale Price Index (WPI), the crude petroleum and natural gas category saw prices contract by 12.3% in June 2025.

• This is the tenth consecutive month of contraction, with the last three months seeing double-digit declines.

Lower crude oil prices help reduce costs for:

• Transport

• Manufacturing

• Power generation

This trickles down to keep prices in check throughout the economy.

Wholesale Inflation Trends

While CPI tracks retail prices paid by consumers, WPI tracks prices at the wholesale level. WPI also showed relief:

• Overall WPI registered -0.13% in June 2025, indicating contraction.

• This marks the first time in 20 months that wholesale inflation has been negative.

• In the food articles category, WPI saw prices fall by 3.75%, a huge turnaround from 11.1% inflation in June 2024.

• The broader food group in WPI also contracted by 0.3%.

These wholesale trends suggest that producers are seeing lower input costs, which may keep consumer prices low in coming months.

Broader CPI Details

Other parts of the CPI in June 2025 showed mixed trends:

• Paan, tobacco, intoxicants: Flat at 2.4%.

• Housing: Slight rise to 3.24%, from 3.16% in May.

• Miscellaneous goods and services: Varied movements.

But the dominant driver was the clear, broad-based fall in food prices.

Why Food Prices Matter So Much

In India, food accounts for nearly 40% of the CPI basket. When food prices rise sharply, as they did in 2022 and early 2023, overall inflation soars. When they fall, it pulls the entire CPI down.

Cheaper food has a disproportionate benefit for poorer households who spend a larger share of income on eating.

Factors Behind Cheaper Food

Several reasons explain the current trend:

• Better harvests due to favourable weather

• Improved supply chains post-pandemic

• Government interventions to cool prices (stock limits, export bans)

• Statistical base effect—last year’s high prices make this year’s rate look much lower

Economists expect food inflation to remain contained if monsoon rains are normal and no major supply shocks occur.

Crude Oil Prices: A Major Relief

India imports most of its crude oil. Global price trends directly affect:

• Petrol, diesel rates

• LPG costs

• Manufacturing and transport costs

The 12.3% contraction in crude oil prices in June marks the tenth month of continuous decline. This is a huge break for India’s import bill and for controlling inflation.

Reasons for falling oil prices include:

• Weak global demand

• Higher production in non-OPEC countries

• Market adjustments post-pandemic

This trend reduces the pressure on India’s current account deficit and stabilises the rupee.

Government Data on Inflation

The Ministry of Statistics and Programme Implementation released the CPI data on Monday.

Key highlights:

• CPI inflation at 2.1%, lowest since Jan 2019.

• Food and beverages category: -0.2%.

• Fuel and light: 2.55%.

• Housing: 3.24%.

The Ministry of Commerce and Industry released WPI data showing:

• Overall WPI at -0.13%.

• Food articles: -3.75%.

• Crude petroleum and natural gas: -12.3%.

What This Means for You

For consumers:

• Lower food bills.

• Stable fuel prices.

• Better household budgets.

For businesses:

• Lower input costs.

• Potential for price stability in products.

For the government:

• Relief from political pressure over cost of living.

• More room for economic policy decisions.

For the Reserve Bank of India:

• Greater flexibility in interest rate policy.

• Lower risk of having to raise rates to fight inflation.

Economists' Views

Rajani Sinha of CareEdge Ratings:

• Predicts food inflation to stay low.

• Credits healthy agricultural activity and favourable base effect.

Most analysts agree:

• The disinflationary trend is likely to continue short-term.

• But risks remain if monsoons fail, global oil prices rise, or supply shocks occur.

Inflation Control Measures

The Indian government has taken several steps to manage inflation:

• Stock limits on essential food items to prevent hoarding.

• Export bans on select commodities to ensure domestic availability.

• Import duty adjustments to make certain foods cheaper.

• Improved logistics to cut wastage and costs.

These measures have helped ease food price pressures.

Global Context

India is not alone. Many countries saw high inflation in 2022–23 due to:

• Pandemic-related disruptions.

• The Russia-Ukraine war affecting food and energy prices.

But as global supply chains normalise and demand moderates, many economies are seeing cooling inflation.

Future Outlook

While June’s data is encouraging, challenges remain:

• Monsoon dependency: A bad monsoon could push food prices up again.

• Global oil volatility: Geopolitical tensions could reverse the fall in crude prices.

• Imported inflation: Currency weakness can make imports costlier.

Policymakers must stay vigilant.

The Importance of Low Inflation

Low, stable inflation is crucial because:

• It protects the purchasing power of families.

• It supports economic growth by reducing uncertainty.

• It allows businesses to plan better.

• It makes borrowing costs predictable.

Conclusion

June 2025’s inflation data is a major positive signal for India’s economy. At 2.1%, retail inflation is at its lowest in over six years. Falling food and fuel prices are easing the burden on households and stabilising the broader economy.

But sustained low inflation will require good monsoons, prudent policy, and continued global price moderation. Both the government and the RBI will need to balance supporting growth with keeping inflation in check.

For now, Indian consumers can breathe a sigh of relief, with the hope that this cooling trend continues in the coming months.

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