India’s CPI Drops to Six-Year Low in June

Source Credit : Portfolio Prints

India’s annual Consumer Price Index (CPI) inflation fell to 2.10% in June 2025, the lowest level since January 2019, marking a six-year low.

Key Highlights

• Headline CPI: Declined from 2.82% in May to just 2.10% in June—well below the RBI’s lower tolerance bound of 2%, and under the consensus forecast of 2.5%.


• Food Prices: The primary driver. Food inflation turned negative: –1.06% for June vs +0.99% in May. Vegetables plunged 19%, cereals slowed to +3.7%, and pulses dropped 11.8%.


• Base Effect & Monsoon: Favourable monsoon rains boosted agricultural output, generating strong supply conditions. These base effects also played a role.


• Core Inflation: Mildly rose to 4.4–4.6%, reflecting steady demand in non-food sectors.

RBI Policy Implications

• In June, the RBI cut the repo rate by 50 bps to 5.5%, citing easing inflation.


• With CPI well below the 2–6% range, markets expect further easing. Economists predict two more 25 bps cuts, possibly in October or December, though some expect the RBI to pause at next meetings to study data.


• Analysts caution that while headline inflation is soft, weak consumption indicators—like car and home sales—suggest subdued demand, adding complexity to the policy outlook.

Market & Economic Reactions

• Indian equity markets surged: the Sensex jumped ~450 points, and the Nifty topped 25,200, as investors cheered disinflation and the prospect of more rate cuts.


• Some analysts flagged concerns about weak domestic demand, underscoring the need for complementary fiscal or structural reforms.

Bottom Line

Metric	Expectation
CPI Forecast FY26	Revised downward from 3.7% to ~3–3.4%
Rate Cuts	Focus on Oct/Dec after RBI monitors growth, rural monsoon output & global risks
Risks	Core inflation persistence, weakening demand, global stability

Data By Portfolio Prints

Summary

June’s CPI dip to 2.10% marks its slowest pace since early 2019, driven by collapsing food prices and robust agricultural supply. This gives the RBI confidence to potentially lower rates further in the latter half of 2025. Still, uncertainties around consumption demand and core inflation suggest a cautious, data‑driven approach ahead.