Bengaluru, June 9
India’s consumer inflation is expected to have fallen to 3% in May 2025, marking its lowest level since April 2019, according to a Reuters poll. The drop is attributed to a favourable base effect and declining food prices, especially cereals and pulses. This easing in price pressure offers relief to households and strengthens the Reserve Bank of India’s (RBI) recent move to boost growth.
On June 7, the RBI took markets by surprise by announcing a 50 basis points cut in its key policy rate—double what analysts had expected. This move signaled a shift from its previous ‘accommodative’ policy stance to a more ‘neutral’ one, indicating that further rate cuts may not be forthcoming.
A survey conducted by Reuters between June 5 and 9, involving 50 economists, forecast that inflation based on the Consumer Price Index (CPI) would fall from 3.16% in April to 3.00% in May. If confirmed, this would be the fourth month in a row that inflation stays below the RBI’s medium-term target of 4%, the longest such run in nearly six years.
Economists believe the inflation decline was supported by better harvest conditions and early arrival of monsoon rains, which helped stabilize food supplies despite ongoing heatwaves.
“We expect inflation to drop to 3% due to lower food prices and a positive base effect,” said Kanika Pasricha, Chief Economic Advisor at Union Bank of India. However, she also noted that the rate at which food prices are dropping is beginning to slow.
Yes Bank Chief Economist Indranil Pan concurred, “Even with record heat, the early monsoon rains have managed to keep food inflation in check for most items.”
While core inflation, which strips out food and energy, might have crept up to 4.20% in May, from April’s estimated 4.00–4.10%, India’s official statistics agency does not publish such core inflation data. It is, however, one of the most important measures to gauge underlying demand.
Besides, WPI inflation too is predicted to fall to a 14-month low of 0.80% in May from 0.85% in April.
With inflation firmly under control, the RBI surprise rate cut is interpreted as a tactical maneuver to give economic growth a push without compromising price stability.
