India’s CPI Inflation in May Dips To 6-Yr-Low At 2.82%, Food Inflation Eases; Housing, Health Costs Rise

Driven down by falling food inflation, India's retail inflation, based on the Consumer Price Index (CPI), declined to a 6-year low mark of 2.82% in May, compared to 3.16% in April 2025. Food inflation came significantly lower at 0.99% in May 2025, whereas health and housing costs increased during the month, according to the data released by the Ministry of Statistics & Programme Implementation (MOSPI) on Thursday, June 12.

Food inflation declined in May, apparently due to a decline in inflation of pulses and products, vegetables, fruits, cereals and products, household goods and services, sugar and confectionery and egg and the favourable base effect.

Inflation based on the Consumer Price Index (CPI) data came nearly a week after the Reserve Bank of India had reduced the inflation target for the financial year 2025-26 to 3.75% from 4%. Additionally, the RBI had reduced the repo rate cut to 5.5%.

CPI inflation's decline in May was below expectations due to sustained moderation in food inflation and a favourable base effect; however persistent rise in edible oil inflation remains a concern, according to Rajani Sinha, Chief Economist, CareEdge Ratings.

"Double-digit inflation in edible oils and fruits partially offset the broader moderation. The persistent rise in edible oil prices remains a concern, driven by a contraction in oilseed sowing, rising global prices, and India's dependence on imports in this segment," noted Sinha.

Lowering Food Inflation, Rising Health, and Real Estate Costs

While food inflation cooled dowing significantly in May, housing and health inflation continued to remain high. Housing inflation rate increased by 3.16% year on year (YoY) to 3.16% in May 2025. Whereas, housing inflation stood at 3.06% in April.

Education inflation declined on a YoY basis to 4.12%, which stayed at 4.13% in April 2025. Whereas, health inflation, which tracks changes in the price of healthcare goods and services, increased at a rate of 4.35% on a YoY basis. Health inflation was at 4.25% in April 2025.

Sector-Wise Inflation Rate in May

The headline inflation declined to 2.59% in May 2025 from April's 2.92% in the rural sector. Whereas, the CFPI-based food inflation also decreased to 0.95% from April's figure of 1.85%. Food inflation in urban areas fell significantly from April's 3.36% to May's professional rate of 3.07%.

CPI Inflation in May Impacted By Food Price Moderation, Better Rural Supply Chains, Early Monsoon

Calling a below-expectations decline in CPI inflation a 'rare confluence' of multiple factors, Arsh Mogre, Economist Institutional Equities, PL Capital, said, "This fall is not merely statistical-it reflects a rare confluence of broad-based food price moderation, improving rural supply chains, early monsoon onset, and favorable government inventory buffers, making this the most durable disinflation in the current cycle."

CPI Inflation Outlook

Amid favourable factors, CPI inflation is likely to remain at comfortable levels in the near term averaging at 4% for FY26, according to Sinha. "We expect CPI inflation to remain at comfortable levels in the near term, averaging 4% for FY26. This will be supported by moderating food prices, stable core inflation, and favourable base effects. However, downside risks from supply chain disruptions due to trade policy uncertainties and geopolitical tensions remain key monitorable. On the monetary policy front, the RBI's frontloaded rate cuts are likely to limit the room for further easing unless growth weakens materially." Sinha added.