India’s retail inflation cooled to its lowest level in over six years in May, as food prices sharply moderated, according to provisional data released by the Ministry of Statistics and Programme Implementation (MoSPI). The Consumer Price Index (CPI)-based inflation rate eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May 2024.
This marks the fourth straight month of sub-4% inflation — the longest such streak in five years, reinforcing expectations of a sustained softening trend. The data release closely follows the Reserve Bank of India’s (RBI) recent 50 basis point rate cut, which brought the repo rate to 5.5%. This is the third consecutive rate cut by the central bank, totaling a 100 basis point reduction since February, signaling a decisive shift from inflation containment to growth stimulation.
Food inflation, a key driver of headline CPI, fell to 0.99% in May, from 1.78% in April and 8.69% a year earlier, reflecting significant softening in prices of perishables.
“India’s inflation came in close to our expectations in May, below 3%—the softest since mid-2019,” noted Radhika Rao, Executive Director and Senior Economist, DBS Bank. “Selected perishable food groups rose only modestly on a sequential basis and moderated sharply on annual terms, aiding the headline number.” Rao projected that average CPI inflation will remain below 4% for FY26.
She also noted that benign core-core inflation (excluding food and fuel) points to lingering economic slack, justifying the RBI’s move to frontload monetary and liquidity stimulus. However, Rao cautioned that monsoon progress, which has currently stalled after an early onset, would be critical to watch for near-term inflation dynamics.
The last time CPI inflation stayed below 3% for a comparable duration was between November 2018 and April 2019—a period during which the RBI had also eased policy rates by 50 basis points.
The latest inflation figures are likely to reinforce expectations that the central bank may continue to adopt a pro-growth stance in the near term, especially amid improving macroeconomic stability and a favourable global commodity backdrop.
