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Retail Inflation at 77-Month Low
Context:
Retail inflation (CPI) for June 2025 eased to 2.1%, the lowest in 77 months, while wholesale inflation (WPI) registered a contraction of -0.13% for the first time in 20 months, primarily driven by falling food and crude oil prices.
CPI and WPI Trends:
- Consumer Price Index (CPI) inflation fell to 1% in June 2025 from 8.4% in June 2024, largely due to sustained deflation in food items such as vegetables, pulses, spices, and meat.
- Wholesale Price Index (WPI) contracted by -0.13%, lowest since October 2023, showing continued decline in wholesale prices for crude petroleum and natural gas (-12.3%) and food articles (-3.75%).
Sectoral Highlights (CPI):
- Food and Beverages saw a -0.2% contraction, indicating the eighth straight month of food inflation easing.
- Fuel and Light inflation eased to 2.55%, down from 2.8% in May, despite a low base of -3.6% in June 2024.
- Housing Inflation increased marginally to 3.24% from 3.16% in May.
- Key Drivers of Disinflation:
- A favourable base effect from 2024.
- Healthy monsoon and agricultural output, improving food supply.
- Global crude oil price decline, aiding both retail and wholesale inflation moderation.
Policy Relevance:
- A CPI below the RBI’s medium-term inflation target of 4% could influence monetary policy decisions, potentially leading to rate cuts or a dovish stance.
- Low inflation benefits real household income, reduces cost pressures on MSMEs, and boosts consumption demand.
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