Fall in food prices pulls down May CPI inflation to 2.82%, lowest since Feb 2019
At 2.82 per cent, the latest inflation rate based on the Consumer Price Index (CPI) was somewhat lower than economists' expectations of around 3 per cent. CPI inflation stood at 3.16 per cent in April 2025 and 4.80 per cent in May 2024. The last time retail inflation was lower was in February 2019, when it stood at 2.57 per cent.
Per MoSPI data, food inflation as measured by the Consumer Food Price Index (CFPI) almost halved to a 43-month low of 0.99 per cent last month from 1.78 per cent in April 2025 as fruit prices declined by 2 per cent month-on-month (m-o-m) while those of pulses were down 1.7 per cent. Cereals also helped to bring down the overall food inflation in May 2025, with prices down 0.6 per cent compared to the previous month.
Prices of vegetables, meanwhile, inched up slightly last month from April 2025. However, in year-on-year (y-o-y) terms, retail prices of vegetables were down 13.7 per cent — the sharpest pace of decline since December 2022, according to Paras Jasrai, associate director and economist at India Ratings & Research.
Proteins became more expensive on a sequential basis in May 2025. While the price of meat and fish was up 1.5 per cent m-o-m, egg prices rose 2.5 per cent and milk turned 0.7 per cent more expensive in May.
Core inflation — which excludes items whose prices are volatile such as food and fuel and is seen as an indicator of underlying demand conditions — inched up to around 4.2 per cent, according to calculations done by The Indian Express. The steady rise in core inflation over the last year-and-a-half or so is suggestive of 'steady demand conditions' in the economy, said Jasrai of India Ratings.
In terms of the regional break-up, urban inflation eased to 3.07 per cent in May 2025 from 3.36 per cent the previous month, while rural CPI inflation declined to 2.59 per cent from 2.92 per cent. Inflation in May 2025 was highest in Kerala at 6.46 per cent, while it was lowest in Telangana, at 0.55 per cent.
According to Sujan Hajra, chief economist at Anand Rathi Group, the downward trend in CPI inflation is expected to continue through October 2025, with averaging for FY26 likely to undershoot the RBI's latest forecast of 3.7 per cent. ICRA Chief Economist, Aditi Nayar, expects retail inflation to decline further to around 2.5 per cent in June 2025 and average 3.5 per cent in FY26.
'Looking ahead, on a y-o-y (year-on-year) basis, as many as 17 of the 22 food items for which the daily data is released, recorded a lower y-o-y inflation in June 2025 (until June 10, 2025) vis-à-vis May 2025, barring most edible oils and tea,' Nayar said. 'Moreover, the GoI (Government of India) has reduced the import duty on edible oils effective end-May 2025, which would lead to a softening in prices going forward, thereby auguring well for the oils and fats inflation readings through the fiscal, which would also be suppressed by a high base.'
Rajani Sinha, chief economist at CareEdge, said that while the India Meteorological Department's forecast of an above-normal monsoon reinforces the favourable outlook for food inflation, the spatial and temporal distribution of the rains will be critical. 'Despite the early onset, monsoon activity has slowed, although it remains early in the season, with potential for recovery in the coming weeks. Weather-related risks will need close monitoring,' Sinha added.
While the RBI's Monetary Policy Committee (MPC) last week cut the policy repo rate by an unexpectedly large 50 basis points (bps) to 5.50 per cent, it also tightened the stance of its policy to 'neutral' from 'accommodative', arguing that 'monetary policy is left with very limited space to support growth'.
However, economists see the space for more one rate cut from the MPC, although not at the committee's next meeting in August 2025.
Jasrai of India Ratings, for instance, expects a status quo on interest rates in August 2025 considering inflation is heading for the RBI's forecast of 2.9 per cent for April-June 2025 and the monetary easing affected so far. 'We expect, at max one more 25 bps cut this fiscal, unless there are surprises from global development or growth declines sharply,' Jasrai said.
On Tuesday, the World Bank lowered its global growth forecast for 2025 to 2.3 per cent from its January 2025 prediction of 2.7 per cent citing 'heightened trade tensions and policy uncertainty'. Growth in 2026 is expected to pick up only slightly to 2.4 per cent and further to 2.6 per cent in 2027. While a global recession is not expected, the World Bank's latest projections for the next two years, should they turn out as forecast, would mean average global growth in the first seven years of the 2020s will be the slowest of any decade since the 1960s, it said.
Siddharth Upasani is a Deputy Associate Editor with The Indian Express. He reports primarily on data and the economy, looking for trends and changes in the former which paint a picture of the latter. Before The Indian Express, he worked at Moneycontrol and financial newswire Informist (previously called Cogencis). Outside of work, sports, fantasy football, and graphic novels keep him busy.
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