Retail inflation in India eased to 2.82% in May 2025, the lowest annual rate since February 2019, according to government data released on Thursday. The reading reflects a 34 basis point decline from April’s 3.16%, signalling a sharp slowdown in consumer price growth. This moderation was largely driven by a continued decline in food prices and a broad-based cooling across key consumption categories.

The cooling trend was primarily led by a significant drop in food inflation, which fell to 0.99% in May from 1.78% in April. Rural and urban food inflation were closely aligned at 0.95% and 0.96%, respectively.

Vegetable prices played a key role in the decline, posting a 13.7% year-on-year drop in May, deepening from an 11% fall in April. Cereal inflation also eased, with prices rising 4.77% in May compared to 5.35% the previous month.

The pulses category witnessed a sharper contraction, with prices tumbling 8.22% in May, a steeper fall than the 5.23% decline recorded in April.

According to the government, the broad-based decline in both headline and food inflation was supported by slower price growth across essential items, including pulses and products, vegetables, fruits, cereals, household goods and services, sugar and confectionery, and eggs.

The favorable base effect and easing prices in key food categories have contributed to the sharp moderation in inflation, offering relief to consumers and lending support to the Reserve Bank of India’s monetary policy stance.

Core inflation, which excludes volatile food and fuel components, rose slightly to 4.2% in May from 4.1% in April, reaching its highest level since October 2023. Despite the uptick, overall inflationary pressures remain subdued.

Month-on-month, the general CPI index edged up 0.2%, with noticeable movements in certain segments. The fuel and light index rose by 0.8%, while oils and fats saw a 0.5% increase. Miscellaneous items climbed 0.3%, and modest increases were observed in clothing and footwear (0.2%), housing (0.2%), and vegetables (0.1%).

Inflation in urban areas dropped to 3.07% in May from 3.36% in April, while rural inflation declined to 2.59% from 2.92% over the same period.

The latest inflation figures suggest a favourable outlook for the Reserve Bank of India, which continues to monitor price trends amid global economic uncertainties and a normal monsoon outlook.

Aditi Nayar, Chief Economist and Head – Research & Outreach at ICRA Ltd, said CPI inflation cooled to a 75-month low of 2.8% in May 2025, led by a sharp moderation in the food and beverages segment, which dropped to a 73-month low of 1.5% from 2.1% in April. 

“The core-CPI inflation eased to 4.3% in May 2025 from 4.4% in the previous month. Looking ahead, on a YoY basis, as many as 17 of the 22 food items for which the daily data is released, recorded a lower YoY inflation in June 2025 (until June 10, 2025) vis-à-vis May 2025, barring most edible oils and tea. In YoY terms, the contraction in most vegetable prices widened in June 2025 (until June 10) as compared to May 2025, largely on account of an elevated base. Moreover, the GoI has reduced the import duty on edible oils effective end-May 2025, which would lead to a softening in prices going forward.”