Retail Inflation Drops to 2.1% In June, Lowest Since 2018

India’s retail inflation dropped to 2.1% in June 2025, reaching its lowest level in over six years, according to government data released on July 14. The fall is mainly because of a sharp drop in food prices, especially vegetables and pulses. This is important as it may influence the Reserve Bank of India’s (RBI) decisions on interest rates in the coming months.

Inflation Reaches 77-Month Low

India’s consumer inflation in June 2025 was recorded at 2.1%, falling from 2.8% in May. This is the lowest level in 77 months (over six years). The major reason behind this fall is declining food prices, especially vegetables, which were 19% cheaper than last year, and pulses, which fell by 12%.

At the same time, wholesale inflation also turned negative, touching -0.13%, the lowest in nearly two years. Food inflation entered deflation, meaning prices actually dropped compared to the previous year—something that hasn’t happened since April 2019.

What’s Becoming Cheaper—and What’s Not

Prices of vegetables, pulses, and even meat and fish went down, helping cool overall inflation. However, edible oils and fruits still remained costly, showing inflation rates of 17.8% and 12.6%, respectively. Egg prices rose slightly by 2.6%, marking a six-month high.

Outside food, prices of clothing and footwear eased a bit to 2.55%, but sectors like healthcare, transportation, and gold saw rising costs. This mixed trend shows that while food prices are cooling, some essential services still remain expensive.

RBI’s Response: Room for Rate Cuts?

Thanks to lower inflation, the RBI’s Monetary Policy Committee (MPC) has already cut interest rates three times since February 2025, including a 50 basis point cut in June. The current repo rate stands at 5.5%, down from 6.5% earlier this year.

Although inflation for the April–June quarter averaged 2.7%, below the RBI’s own estimate of 2.9%, experts believe the central bank may not reduce rates further immediately. Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said that even though inflation is comfortable, the RBI may pause rate cuts and wait to see how the economy reacts.