India’s Retail Inflation Falls to 2.8% What It Means for You
India’s retail inflation, as measured by the Consumer Price Index (CPI), eased to a six-year low of 2.8% in May 2025. This marks a sharp decline from 3.16% in April 2025 and is the lowest CPI level since February 2019.
Notably, food inflation dropped to just 0.99%, the lowest in 43 months, bringing major relief to households and policymakers.
Key Highlights: May 2025 CPI Data at a Glance
| Indicator | May 2025 | April 2025 | Change |
|---|---|---|---|
| Overall CPI Inflation | 2.82% | 3.16% | ↓ |
| Food Inflation | 0.99% | 2.5% | ↓↓ |
| Vegetables (YoY) | -13.7% | -6.1% | ↓ Sharp fall |
| Cereals Inflation | 5.3% | 6.4% | ↓ |
| Rural CPI | 2.8% | 3.3% | ↓ |
| Urban CPI | 2.9% | 3.1% | ↓ |
Source: Ministry of Statistics and Programme Implementation (MoSPI)
Why Did Inflation Fall So Drastically?
- Vegetables and pulses prices saw year-on-year deflation
- Stabilised global commodity prices
- Effective government supply interventions
- Weak consumer demand in rural markets
What RBI Might Do Next
The Reserve Bank of India (RBI), in its June 2025 policy, revised its FY26 inflation forecast down to 3.7% from 4%. With CPI inflation below the 4% target, many economists are now predicting a 25 basis points rate cut in October 2025, especially if the monsoon is favourable.
RBI’s Forecast Trajectory for FY26:
- Q1: 4.3%
- Q2: 3.8%
- Q3: 3.6%
- Q4: 3.3%
Expert View: Is This a Window for Real Wage Growth?
A lower inflation rate increases real purchasing power—that is, the value of wages after adjusting for inflation.
“If inflation remains around 3%, even modest nominal wage hikes can translate into real income growth. This could support consumption recovery in H2 FY26.”
– Anjali Verma, Senior Economist
Legal and Policy References
- CPI Data Source: MoSPI Official Portal
- Inflation Forecast Update: RBI Monetary Policy Statement – June 2025
- Food inflation components: Press Release by NSO, Ministry of Statistics
FAQs on Retail Inflation
Q1. How is retail inflation measured?
A: Through CPI, tracking price changes in a basket of goods and services.
Q2. Is lower CPI always good?
A: It’s beneficial for consumers, but too low inflation can hurt producers and investment returns.
Q3. Will RBI cut rates soon?
A: It depends on monsoon and food supply. Experts expect a possible cut by October if trends hold.
Summary
India’s retail inflation dropped to a six-year low of 2.8% in May 2025, driven by a sharp fall in food prices. Economists expect the RBI may consider a rate cut in October if the downward trend continues, boosting real incomes and growth.
Conclusion: What Should You Do Now?
If you’re a salaried individual or small business owner, this may be a good time to review your savings strategy. With a potential rate cut on the horizon, debt instruments may see reduced returns—consider diversifying your investments.