India’s retail inflation eases to 2.82% in May, lowest in 75 months

India’s retail inflation, measured by the year-on-year Consumer Price Index (CPI), eased to 2.82 per cent in May 2025, down from 3.16 per cent in April, according to provisional data released by the Ministry of Statistics and Programme Implementation (MoSPI).

This marks the lowest retail inflation print since February 2019, reinforcing expectations of continued price stability in the near term.

Food inflation, a key driver of the overall consumer price movement, dropped sharply to 0.99 per cent in May, compared to 1.78 per cent in April. The last time food inflation was this low was in October 2021. The moderation was largely driven by a decline in the prices of vegetables, pulses, cereals, fruits, and sugar products.

Headline inflation declined by 34 basis points (bps) month-on-month, and food inflation dropped 79 bps—underscoring the impact of favourable base effects and improved food supply conditions.

Notably, the rural headline inflation rate fell to 2.59 per cent in May from 2.92 per cent in April, while urban inflation moderated to 3.07 per cent from 3.36 per cent.

Among other categories, housing inflation rose slightly to 3.16 per cent in May from 3.06 per cent in April. Education inflation remained largely stable at 4.12 per cent, and health inflation edged up to 4.34 per cent. Transport and communication inflation increased to 3.85 per cent, while fuel and light inflation softened to 2.78 per cent from 2.92 per cent.

Kerala recorded the highest state-level inflation at 6.46, followed by Punjab (5.21 per cent), Jammu & Kashmir (4.55 per cent), Haryana (3.67 per cent), and Uttarakhand (3.47 per cent).

In line with market expectations

The sharp fall in inflation has raised hopes of sustained price stability. Bank of Baroda, in a recent report, projected CPI inflation at 2.7 per cent for May, citing easing food prices and better supply conditions. This aligns with the observed trend and suggests that both consumers and policymakers may benefit from continued low inflationary pressure in the coming months.

Analysts are also closely watching monsoon developments. Though the monsoon arrived early, it has weakened since late May. The Indian Meteorological Department (IMD) forecasts a revival starting June 13, which is crucial for the Kharif crop sowing season and will have a direct bearing on future food inflation trends.

RBI’s stance on inflation

The Reserve Bank of India slashed the repo rate to 5.5% and shifted its stance from ‘accommodative’ to ‘neutral’. RBI Governor Sanjay Malhotra indicated that the Monetary Policy Committee (MPC) will take a data-driven approach going forward.

The RBI projects CPI inflation for FY26 at 3.7 per cent. Risks remain balanced, with the central bank urging caution due to potential weather-related shocks and global commodity price volatility.

In the broader context, softening inflation in the United States and other major economies is adding to global optimism about easing interest rate cycles, though India’s recent shift in stance indicates it will be more cautious going forward and not follow suit blindly.

As things stand, India’s inflation trajectory appears stable—a positive sign for households and businesses—even as the RBI remains focused on preserving the delicate balance between growth and price stability.