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India’s retail inflation eased to a 77-month low of 2.1% in June, down from 2.8% in May, driven primarily by a sharp decline in food prices, according to government data released on July 14.
The moderation in consumer prices mirrors the trend in wholesale inflation, which dipped to -0.13% in June—its lowest in nearly two years. Food inflation, which makes up a significant portion of the Consumer Price Index (CPI), entered deflationary territory for the first time since April 2019, marking a 74-month low.
Vegetable prices saw the steepest drop, down 19% year-on-year, while pulses fell by 12%. These declines helped offset continued price pressures in other food categories, including oils, which rose 17.8%, and fruits, up 12.6% from a year earlier.
Meat and fish remained in deflation for the third consecutive month, while egg prices rose 2.6%, the highest increase in six months.
Outside the food basket, inflation in clothing and footwear eased marginally to 2.55% from 2.67% in May. However, services including healthcare and transportation, as well as gold prices, continued to experience upward pressure.
“The softer-than-expected headline inflation comes on the back of moderating food prices,” said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank. “That said, core inflation has edged up slightly, and high-frequency mandi data indicates food prices remain largely subdued, with some exceptions in vegetables.”
The continued decline in retail inflation strengthens the case for a stable interest rate environment ahead of the Reserve Bank of India’s next policy review.
