Headline Trend: Retail Inflation at 6-Year Low
- Retail inflation (CPI) dropped to 2.8% in May 2025, the lowest in 75 months (since February 2019).
- Marks a major disinflationary trend — average retail inflation in FY 2025–26 (so far) stands at 2.99%, lowest for the first two months since 2017–18.
Relevance : GS 3 (Inflations)
Food Inflation Drives Decline
- Food and beverages inflation eased to 1.5% in May, down from 2.1% in April.
- This is the 7th straight month of slowing food inflation.
- Deflation in:
- Vegetables
- Pulses
- Spices
- Meat
- Offset by:
- Double-digit inflation in edible oils and fruits, showing uneven food price movements.
RBI Policy Implication
- Recent RBI interest rate cuts have supported economic activity.
- Given the current low inflation, further rate cuts are unlikely in the near term — a pause in the monetary easing cycle is expected.
- Signals price stability, giving the central bank more flexibility but also caution due to uneven food trends.
Economic Implications
- Positive for consumers, improving real incomes and consumption demand.
- Eases input cost pressure for businesses, especially in food processing and FMCG sectors.
- May allow fiscal space for the government to sustain growth-oriented spending without inflation risks.
Broader Economic Context
- Low inflation aligns with global disinflationary trends, especially in oil and commodity markets.
- Supports macroeconomic stability, attracting foreign investment.
- Helps maintain the inflation target band (4% ± 2%) under the RBI’s Monetary Policy Framework.
