Retail inflation drops to 2.1% in June; WPI slips into deflation at -0.13%

Vegetable and pulses prices see steepest fall in years; WPI turns negative too

India’s retail inflation moderated further in June to 2.1 per cent from 2.82 per cent in May, aided by a positive base effect and a decline in prices in the food and beverage segment for the first time in over six years, offering room for the central bank’s monetary policy committee to maintain status quo in its upcoming reviews. The last time the Consumer Price Index (CPI) reported this mild uptick was in January 2019 — at 1.97 per cent, data released by the National Statistics Office (NSO) on Monday showed. 

Separately, the Wholesale Price Index (WPI)-based factory gate inflation turned negative in June for the first time in 20 months, at -0.13 per cent as against 0.39 per cent in May, data by the Ministry of Commerce and Industry on Monday showed. The last time the WPI reported deflation was in October 2023, at -0.26 per cent. 

 

In retail inflation, the decline in food prices was mainly driven by a 19 per cent year-on-year (Y-o-Y) drop in vegetable prices — the sharpest pace of decline since December 2022 — and an 11.8 per cent (Y-o-Y) decline in pulses — the fastest fall in prices in over seven years. Spices and meat, which together have a 7.5 per cent weight in the CPI, also saw prices drop 3.03 per cent and 1.62 per cent, respectively. 

Besides, the pace of price rise for other items in the food basket, including cereals (3.73 per cent) and sugar (3.5 per cent), decelerated during May. Though the price rise for edible oils (17.7 per cent) and fruit (12.6 per cent) also slowed, it remained in double digits during the month. 

Rajani Sinha, chief economist at CareEdge Ratings, says that the good progress of the monsoon, adequate reservoir levels, and strong kharif sowing bode well for agricultural output and food price stability, and that close monitoring of the monsoon’s spatial and temporal distribution remains crucial. 

“The Reserve Bank of India (RBI) has already front-loaded the rate cuts anticipating moderation in inflation; hence, we do not expect further rate cuts unless economic growth weakens materially,” she added.

 

Core inflation — which excludes volatile food and fuel components — edged up to 4.4 per cent in June, the highest since September 2023, on the back of a surge in gold prices and a steady increase in demand in the economy. 

Paras Jasrai, associate director at India Ratings & Research, says the rising core inflation might look concerning prima facie, but it was due to a sharp increase in prices of jewellery items, as gold prices rose to a 58-month high of 36 per cent due to tensions in West Asia. 

“Services inflation inched up to a 22-month high of 4.1 per cent, indicative of steady demand in the services sector. However, over two-thirds of the items still have inflation of less than 4 per cent, pointing to a broader disinflationary profile of consumption items,” he said. 

The RBI may maintain a status quo in the upcoming review in view of the cumulative easing of 100 basis points done so far in 2025 and the change in stance to neutral from accommodative,” he added. 

Fuel prices decelerated to 2.78 per cent, while inflation in services like personal care (14.7 per cent), health (4.43 per cent), and transport (3.9 per cent) picked up pace in June. 

The NSO data further showed that retail prices rose 1.72 per cent in rural India and 2.56 per cent in urban areas. Among 22 major states and Union Territories (UTs) with a population of more than 5 million for which data is available, 10 states/UTs recorded an inflation rate higher than the national average. 

Kerala recorded the highest retail inflation of 6.71 per cent in June, while Telangana recorded deflation (-0.93 per cent). 

In the WPI, the deflation was led by a decline in the prices of primary food articles (-3.75 per cent), which fell for the third month in a row. This was driven by a decline in the prices of vegetables (-22.65 per cent), pulses (-14.1 per cent), potatoes (-32.7 per cent), onions (-33.5 per cent), and protein-rich food items like eggs, meat, and fish (-0.29 per cent). 

Meanwhile, the prices of factory-gate manufactured products decelerated to 1.97 per cent in June. This was led by a slowdown in prices of manufactured food products (6.99 per cent), paper products (1.52 per cent), chemicals (0.59 per cent), and rubber (0.47 per cent), among others. Prices of basic metals (3.14 per cent) and semi-finished steel (3.7 per cent) also dipped during the month. 

Fuel and power prices declined by 2.65 per cent in June, as the deceleration in global commodity prices — especially mineral oils — led to a fall in the prices of petrol (-6.57 per cent) and high-speed diesel (-5.12 per cent) for the 13th and 26th straight month, respectively. Cooking gas prices, however, rose by 2.68 per cent during June. 

“The seasonal sequential uptick in food prices has been relatively modest in July 2025 so far. Besides, international crude oil prices have also eased somewhat in the ongoing month from the peak seen in June 2025, amid cooling tensions in West Asia, while remaining in deflationary territory. Overall, Icra expects the headline WPI to remain in deflationary territory in July 2025 despite an unfavourable base,” said Icra Ratings Chief Economist Aditi Nayar.