Retail, wholesale inflation eased sharply in June, signalling broad-based price cooling

Mint

14-07-2025

New Delhi: Cooling prices offered a double dose of relief in June, with both retail and wholesale inflation easing sharply, signalling a broad-based tempering of cost pressures across the economy.
Retail price inflation measured by the Consumer Price Index (CPI) came in at 2.1% in June, its slowest pace since January 2019, while wholesale price index-based inflation fell to a 21-month low in June, at -0.13%, marking the first negative reading since October 2023, according to provisional government data released on Monday.
Consumer Price Index (CPI)-based inflation stood at 2.82% in May, and 5.08% in June last year, data from the ministry of statistics and programme implementation (MoSPI) showed.
The wholesale price index (WPI), a proxy for producers' prices, stood at 0.39% in May, and 3.43% in June 2024, according to data from the ministry of commerce and industry.
The government relied on the WPI as its main inflation measure until 2014, when it shifted to CPI to better capture household price pressures.
A Mint poll of 20 economistshad projected CPI inflation to ease to 2.3% in June.
The latest wholesale inflation data bettered expectations, with prices rising at less than the 0.52% projected by economists in a Reuters poll.
June marks the fifth consecutive month of sub-4% inflation, the longest such streak in at least five years.
The data comes just a month after the Reserve Bank of India's (RBI) Monetary Policy Committeecut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February.
The latest data bolsters the case for another rate cut to reinforce the growth momentum, economists said.
Retail food prices slipped into deflation, falling 1.06% in June as the monsoon advanced across the country. The decline was sharper in urban areas than in rural.
By contrast, food inflation had inched up 0.99% in May and surged 9.36% in June last year.
'CPI inflation for June cooled to a six-year low of 2.1% lead by moderating food prices and aided by the high base,' said Garima Kapoor, economist, Elara Capital.
"We expect full-year CPI inflation to remain below RBI's full-year estimate of 3.7% and hence do not rule out the possibility of another rate cut post end of monsoon," Kapoor added.
Retail inflation last dipped below 3% for six consecutive months between November 2018 and April 2019, a period during which the RBI also cut rates by 50 basis points.
During June, a sharp dip was visible in the prices of meat, fish, spices, vegetables and pulses, as compared to the previous month.
Prices of cereals, milk products, oil & fats, fruits, clothing, and fuel also fell, official data showed.
However, the prices of eggs, footwear, health (expenses), and personal care and effects categories witnessed an increase in June compared with the previous month.
At the state level, 12 of 22 major states reported inflation below the national average of 2.10%, including Andhra Pradesh, Assam, Bihar, Delhi, Gujarat, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Telangana, Uttar Pradesh, and West Bengal.
Economists expect food inflation to remain benign, supported by ample rainfall in the coming months, though some warned that the uneven spatial distribution of rain requires careful monitoring.
"The decline is mainly due to decline in food inflation, which is also at 77-month low of –0.20%, led by continued decline in food items particularly vegetable, pulses and spices," said Soumya Kanti Ghosh, group chief economic adviser, State Bank of India, in a research note.
Ghosh warned that trade tariffs could lead to further deflation in domestic relative prices, especially in clothing, footwear, and household electronics, which together account for over 10% of the CPI basket.
"Core inflation has remained sticky at the 4% mark. However, tariff-driven commodity price shocks can tend to lead to some upward bias in the core. Overall, we believe that inflation is likely to remain below RBI's target of 4% this year," said Aditi Gupta, economist at Bank of Baroda.
"Climate-related risks and US tariff policy and its likely impact on global commodity prices remain key risks," she added.
Core inflation is the rise in prices of goods and services, excluding food and fuel.
June's decline in WPI inflation was driven largely by falling food prices, with softer trends seen across fruit, vegetables, pulses, cereals, spices, and edible oils.
Food prices, which make up 24.38% of the index, decelerated by 0.26% annually in June, compared to a 1.72% rise in May.
Cereal prices rose 1.44% year-on-year in June, easing from the 2.56% increase recorded in May.
Meanwhile, vegetable prices contracted by 22.65%, a deeper drop than the 21.62% decline the previous month.
Fruit prices rose 1.59%, much lower than May's 10.17% increase.
Milk prices rose by 2.26% in June, down from 2.66% in the previous month.
"Among the non-food items, the deflation in fuel and power also widened between these months (May and June), exerting downward pressure on the headline print," said Rahul Agrawal, senior economist, ICRA Ltd.
"The seasonal sequential uptick in food prices has been relatively modest in July 2025 so far, which is expected to keep food print in the deflationary zone, unless there is an unusual surge in such prices in the remaining part of the month, especially for vegetables," he added.
Overall, the rating agency expects the headline WPI to remain in the deflationary territory in July 2025 despite an unfavourable base, amid sustained annual deflation in food and crude oil prices.
Meanwhile, manufactured product prices, making up nearly two-thirds of the WPI, rose 1.97% in June, slightly below May's 2.04% increase, according to the official data.
Fuel and power prices contracted 2.65%, deepening from a 2.27% drop in May.
Primary articles, including food, minerals, and crude oil, saw a sharper annual decline of 3.38%, compared with 2.02% a month earlier.