CPI inflation eases to 2.82% in May, logs 6-year low; food prices lead broad-based decline
India’s headline retail inflation fell to 2.82% in May 2025, the lowest year-on-year rate since February 2019, according to data released by the National Statistical Office (NSO) on Wednesday.
The Consumer Price Index (CPI) reading was down 34 basis points from 3.16% in April, driven primarily by a sharp moderation in food prices and a favourable base effect.
Food inflation , measured by the Consumer Food Price Index (CFPI), dropped to 0.99% in May, its lowest since October 2021. This represents a steep fall from 1.78% in April and 8.69% in May 2024. The NSO attributed this easing to declining prices across key food categories including pulses, vegetables, fruits, cereals, eggs, sugar, and household goods and services.
Rural and urban inflation trends
Sectoral inflation overview
The RBI, mandated by the government to maintain retail inflation at 4 percent with a tolerance margin of plus or minus 2 percent, has projected CPI inflation for 2025-26 at 3.7 percent. The quarterly projections are 2.9 percent for Q1, 3.4 percent for Q2, 3.9 percent for Q3, and 4.4 percent for Q4.
Commenting on the data, Aditi Nayar, Chief Economist at Icra said as quoted PTI, “CPI inflation cooled further in May 2025 to a 75-month low of 2.8 percent, led by the food and beverages segment, validating the decision of the Reserve Bank’s Monetary Policy Committee to frontload rate cuts.”
She added, “Overall, the change in the monetary policy stance appears to be a fairly strong signal of a pause, especially when combined with the unexpected CRR cut.”
Nayar further noted, “As of now, we expect rates to be unchanged in the August 2025 policy review. Nevertheless, given our lower inflation and growth forecasts vis-à-vis the projections of the MPC, we are not ruling out the possibility of a final 25 bps rate cut in October 2025, by when the monsoon outturn and its impact on food inflation would be clearer.”
The NSO collects price data from 1,114 selected urban markets and 1,181 villages across all states and union territories.
The Consumer Price Index (CPI) reading was down 34 basis points from 3.16% in April, driven primarily by a sharp moderation in food prices and a favourable base effect.
Food inflation , measured by the Consumer Food Price Index (CFPI), dropped to 0.99% in May, its lowest since October 2021. This represents a steep fall from 1.78% in April and 8.69% in May 2024. The NSO attributed this easing to declining prices across key food categories including pulses, vegetables, fruits, cereals, eggs, sugar, and household goods and services.
Rural and urban inflation trends
- Rural CPI inflation declined to 2.59% in May from 2.92% in April, while rural food inflation dropped to 0.95% from 1.85%.
- Urban CPI inflation eased to 3.07%, down from 3.36%, with urban food inflation falling to 0.96% from 1.64%.
Sectoral inflation overview
- Housing inflation (urban only): 3.16% (vs 3.06% in April)
- Education inflation (combined): 4.12% (vs 4.13%)
- Health inflation (combined): 4.34% (vs 4.25%)
- Transport & Communication (combined): 3.85% (vs 3.67%)
- Fuel & Light (combined): 2.78% (vs 2.92%)
The RBI, mandated by the government to maintain retail inflation at 4 percent with a tolerance margin of plus or minus 2 percent, has projected CPI inflation for 2025-26 at 3.7 percent. The quarterly projections are 2.9 percent for Q1, 3.4 percent for Q2, 3.9 percent for Q3, and 4.4 percent for Q4.
Commenting on the data, Aditi Nayar, Chief Economist at Icra said as quoted PTI, “CPI inflation cooled further in May 2025 to a 75-month low of 2.8 percent, led by the food and beverages segment, validating the decision of the Reserve Bank’s Monetary Policy Committee to frontload rate cuts.”
She added, “Overall, the change in the monetary policy stance appears to be a fairly strong signal of a pause, especially when combined with the unexpected CRR cut.”
Nayar further noted, “As of now, we expect rates to be unchanged in the August 2025 policy review. Nevertheless, given our lower inflation and growth forecasts vis-à-vis the projections of the MPC, we are not ruling out the possibility of a final 25 bps rate cut in October 2025, by when the monsoon outturn and its impact on food inflation would be clearer.”
The NSO collects price data from 1,114 selected urban markets and 1,181 villages across all states and union territories.
Next Story