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Informist, Friday, Jun. 13, 2025

 

MUMBAI – After falling to a 75-month low of 2.82% in May, CPI inflation could moderate further this month, economists said, with some projecting the June headline inflation print at around 2%. 

 

Retail inflation fell to 2.82% in May, the lowest since February 2019 and down from 3.16% in April. Headline inflation moderated as food inflation fell to 0.99%, the lowest since October 2021, even as core inflation rose to a 19-month high of 4.2% last month.

 

Now, economists expect CPI inflation to ease further to around 2%, with any rise in food prices likely to be more than offset by a high base effect. The base effect is such that even if the overall index rises 0.9% on month, the average for the last 12 years, headline inflation will fall to 2.42%. If the overall index remains unchanged in June compared to May, headline inflation will fall to 1.47% just because of the base effect.

 

Barclays expects CPI inflation to fall to 2.1% in June, meaning CPI inflation for Apr-Jun could undershoot the Reserve Bank of India's projection by 20 bps. Last week, the RBI had lowered its June quarter retail inflation forecast to 2.9% from 3.6%.

 

"While price pressures will remain contained due to base effects, we have started witnessing the typical summer increase in vegetable prices in the early days of June," Aastha Gudwani, India chief economist, Barclays, said in a report. "That said, these increases for now appear to be smaller compared with the past two years."

 

According to data from the Department of Consumer Affairs, tomato prices are up 20% on month so far in June. Potato prices also increased, while onion prices continued to trend lower, even as the pace of decline moderated.

 

Retail inflation in India is influenced heavily by food price momentum, with the food price index making up nearly half the consumer price index. Vegetable prices tend to rise during summer months and also because of crop damage from excessive rains during the monsoon season.

 

IDFC FIRST Bank Chief Economist Gaura Sen Gupta expects the supportive base effect in June and July to keep headline inflation at around 2%. In June and July last year, the overall index of the CPI had risen sharply because of a surge in vegetable prices. This has resulted in a favourable base for the two months this year.

 

"The comfort on inflation is derived not just from the broad-based moderation in food inflation, but also from presence of negative output gap," Sen Gupta said. "The latter has kept core inflation subdued since last year."  End

 

Reported by Shubham Rana

Edited by Avishek Dutta

 

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