India’s June retail inflation rate, at 2.1%, the lowest in 77 months, owing largely to the sharp decline in the prices of food items, strengthens the case for another rate cut by the RBI, on top of the cumulative 100 basis points reduction already effected this year.

The All India Consumer Food Price Index (CFPI), a sub-index of the Consumer Price Index (CPI) that tracks changes in the retail prices of food items from cereals to meat, and milk to fruits and vegetables, showed a year-on-year inflation rate of -1.06% for June 2025. Even compared to May, there was a sharp decline of 205 basis points in food inflation. This is the lowest it has been since January 2016.

The defiant category

The oft-asked question of whether the inflation numbers adequately reflect ground realities surfaced again, especially given that India has been through months of relatively benign prices. The counter to this could be found early next year when a fresh CPI series will be launched with a new base year (2024). A slew of new consumer services will reportedly be included in the index, even as existing weights could see a revamp. 

In the June numbers, the category that defied the general trend was ‘personal care and effects,’ which not only includes daily use products such as soaps, shampoos, and toothpaste but also precious metals such as gold and silver. The rate here remained high at 14.76%.