Inflation at its lowest in 6 years — What will RBI do next?

New Delhi: Inflation is at its lowest in six years, and analysts are now asking one question — Is another rate cut on the horizon, given the Reserve Bank of India (RBI) is soon to conduct its next monetary policy meeting. 

Answers may be gleaned from the RBI Governor’s recent statement in an Interview with CNBCTV18 on 15 July 2025.

On 14 July 2025, the Ministry of Statistics and Programme Implementation (MoSPI) released its Consumer Price Index (CPI) data, and the Ministry of Commerce and Industry released the Wholesale Price Index (WPI) data. 

Let us first look into the data before going into the RBI Governor’s statement.

Consumer Price Index (CPI)

The Press Release from MoSPI showed that India’s retail inflation in July declined to its lowest level in over six years, thanks to lower food prices. 

According to the press release, the CPI inflation has declined from 2.82 percent in May 2025 to 2.10 percent in June 2025 (provisional). 

Headline inflation fell 72 basis points from May to June 2025.

Source: CPI Press Release, MoSPI

This is the lowest in 77 months — that is, since January 2019, when inflation was 1.07 percent.

There was a notable decrease in headline inflation and food inflation in June 2025, which was largely due to a favourable base effect and lower inflation rates for various food categories such as vegetables, pulses, meat, cereals, sugar, milk and spices.

Food inflation

During June 2025, the food inflation (year-on-year) was -1.06 percent, with rural and urban rates at -0.92 percent and -1.22 percent respectively. There has been a significant decrease of 205 basis points in food inflation compared to May 2025, making it the lowest since January 2019.

The graph below shows the top five states with the highest year-on-year inflation rates for April 2025:

Kerala tops the states with the highest inflation, followed by Punjab, Jammu and Kashmir, Uttarakhand and Haryana.

Source: CPI Press Release, MoSPI

Wholesale Price Index (WPI)

The annual inflation rate, based on the All India Wholesale Price Index (WPI) for June 2025, is -0.13 percent (provisional), compared to June 2024. 

This is the lowest since October 2023, when it was -0.3 percent.

In June 2025, there was a negative rate of inflation, mainly attributed to a decrease in prices of food articles, mineral oils, manufacture of basic metals, crude petroleum and natural gas.

WPI Food Inflation

The WPI Food Index, which includes food articles and food products, increased from 189.5 in May 2025 to 190.2 in June 2025. 

The rate of inflation based on the WPI Food Index decreased from 1.72 percent in May to -0.26 percent in June 2025.

RBI Governor’s view on inflation, future rate cut and foreign banks

As the headline inflation is showing a downward trend for the fifth month in a row, inflation has remained well below the Reserve Bank of India’s (RBI) inflation target of 4 percent.  

Speaking to CNBCTV18 on Tuesday (15 July 2025), RBI Governor Sanjay Malhotra explained their neutral position, stating they could adjust their strategy based on future projections, not solely current figures. 

He added that inflation and growth are equally important; it’s always a combination of both.

When asked about foreign banks, the RBI Governor stated in the interview thus: “As per the FDI policy, foreign banks are allowed up to 74 percent and can start business in our country with even up to 100 percent. That’s even more than 74 percent.”

When further questioned about case-by-case allowing, he stated that, “As I mentioned to you, for foreign banks, they can go up to 100 percent FDI. So if you don’t allow them even 26 percent, that kind of seems to defy logic. We will be okay in allowing them, whether it is on a case-to-case basis, whether it is as a general matter of policy, these are matters of details which we will work out.”

Next date of CPI and WPI inflation press releases 

The July 2025 CPI will be released on August 12 2025 (Tuesday) or the next working day in case August 12 is a holiday.

The Wholesale Price Index (WPI) for the month of July 2025 will be released on August 14 2025.