Easing food prices push retail inflation down to six-year low of 2.8% in May
India’s retail inflation eased to a 75-month low of 2.8% in May 2025, driven by falling food prices. Food inflation slowed to 1.5%, with sharp deflation in vegetables and pulses. However, edible oil inflation remained high. Economists expect no further rate cuts for now, given the recent RBI moves and a largely benign inflation outlook.
Retail inflation eased to a 75-month low of 2.8% in May 2025, driven downwards by falling food inflation, according to data released on Thursday. Inflation as measured by the Consumer Price Index was last lower than this in February 2019, more than six years ago.
Overall, based on the two months of data available for this financial year, retail inflation has averaged 2.99% in 2025-26, the lowest average for the first two months of a financial year since 2017-18.
Inflation in the food and beverages category eased to 1.5% in May 2025, down from 2.1% in April. This marks the seventh consecutive month of slowing food inflation.
Cooking oil prices rise
“Deflation in key components such as vegetables, pulses, spices, and meat contributed to this decline,” said Rajani Sinha, Chief Economist at CareEdge Ratings. “However, double-digit inflation in edible oils and fruits partially offset the broader moderation.”
Vegetable prices contracted 13.7% in May 2025, pulses prices contracted 8.2%, inflation in spices contracted 2.8%, and meat prices contracted 0.4%.
Ms. Sinha added that the persistent rise in edible oil prices remains a concern, driven by a contraction in oilseed sowing, rising global prices, and India’s dependence on imports in this segment.
“The government’s recent move to reduce the basic customs duty on imported crude edible oils from 20% to 10% is expected to offer some relief going forward,” she said.
Likely pause in rate cuts
Inflation in the paan, tobacco, and other intoxicants category quickened marginally to 2.4% in May from 2.1% in April. Similarly, inflation in the housing segment inched up to 3.2% in May from 3.1% in April. Inflation in the clothing and footwear category remained exactly the same in May as it was in April, at 2.67%.
Economists say that this substantial easing of inflation and the RBI’s recent interest rate cuts mean the central bank will likely pause further rate cuts in the short term.
“While the overall inflation trajectory is expected to remain benign, the recent frontloaded policy actions and the guidance of limited room for incremental easing suggests a prolonged pause for now, with further actions being highly data dependent,” said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank.
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Source : The Hindu
