On 12 June 2025, the Ministry of Statistics And Programme Implementation (MoSPI) released the Consumer Price Index data. Inflation for May 2025 has declined below 3 percent. Last time inflation was below 3 percent was in April 2019 when it was 2.99 percent.
Consumer Price Index (CPI)
The Press Release from MoSPI showed that India’s retail inflation in April declined to its lowest level in over six years — thanks to lower food prices.
Consumer Price Index (CPI) inflation has declined from 3.16 percent in April 2025 to 2.82 percent in May 2025 compared to 4.80 percent in the same month in 2024.
This is the lowest in 75 months (i.e. 6 years and 3 months) since February 2019 when it was 2.57 percent.
Food inflation
The year-on-year food inflation rate in India for May 2025 is 0.99 percent, with rural and urban rates at 0.95 percent and 0.96 percent respectively.
Food inflation dropped significantly, from 1.78 percent in April to 0.99 percent in May 2025, which was the main reason for the cooling trend.
In May 2025, food inflation saw a significant drop of 79 basis points compared to April 2025, marking the lowest level since October 2021.
Falling prices of pulses, vegetables, fruits, cereals, household goods, sugar, confectionery, eggs, and a positive base effect contributed significantly to the decrease in headline and food inflation during May 2025.
Significant year-on-year price declines were observed in major food categories — a 13.70 percent in vegetable prices and an 8.22 percent fall in pulse prices, while easing pressure was witnessed on cereal prices.
Inflation in fuel slowed to 2.78 percent, in contrast to housing inflation, which climbed to 3.16 percent.
The overall moderation of headline inflation wasn’t significantly impacted by the sustained high inflation rates in education (4.12 percent), health (4.34 percent), and transport (3.85 percent).
The graph below shows the top five states with the highest year-on-year inflation rates for May 2025.
Kerala tops the states with the highest inflation followed by Punjab, Jammu and Kashmir, Haryana and Uttarakhand.
Monetary Policy decision and inflation target
It is to be remembered that the Reserve Bank of India’s has opted for a rate cut by 50 basis points to 5.50 percent in response to easing inflationary pressures.
This marks the third consecutive rate cut since February, signalling a focus on boosting economic growth. RBI Governor Sanjay Malhotra cited softening inflation and slower growth as reasons for the decision.
The RBI shifted its policy stance from “accommodative” to “neutral,” showing a balanced approach to managing growth and inflation.
Headline inflation continues its downward trend, remaining well below the RBI’s inflation target of 4 percent.
The central bank forecasts that CPI inflation will be around 2.9 percent in the second quarter of 2025, but will gradually increase to reach 4.4 percent by the end of the fiscal.
Need for policymakers’ attention
Core Inflation means General Inflation excluding food and fuel inflation (i.e. inflation minus food and fuel inflation). Although headline inflation decreased for a seventh straight month in May 2025, core inflation climbed to approximately 4.2 percent.
Policymakers need to address this issue.
