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
- 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%)
Among states and union territories, Kerala recorded the highest inflation at 6.46 percent, followed by Punjab at 5.21 percent, Jammu and Kashmir at 4.55 percent, Haryana at 3.67 percent, and Uttarakhand at 3.47 percent. Telangana reported the lowest inflation at 0.55 percent.
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.”