May 2025 India CPI inflation falls to 75-month low of 2.82%

13 Jun 2025 , 09:34 AM

MAY 2025 CPI INFLATION FALLS SEVENTH MONTH IN A ROW

After peaking at 6.21% in October 2024, headline inflation in India has progressively fallen by 339 bps to 2.82%. This was triggered by food inflation plummeting from 10.87% to 0.99% in the same period. For May 2025, headline CPI inflation at 2.82% was 18 bps lower than the Reuters estimate of 3.00%. While a solid Kharif and Rabi last year as well as prospects of a good monsoon this year played a part, there are some trends one cannot miss. For instance, despite food inflation being under 1%, oil & fat inflation as well as fruits inflation are well into double-digits. However, this has been offset by deep disinflation in vegetables, pulses, spices, and high protein foods. Due to the dichotomy, averages may not be representative.

FOOD INFLATION FALLS SHARPLY; BUT CORE INFLATION STICKY

The headline inflation is at a 75-month low; and such low levels of inflation were last seen in February 2019; before the onset of COVID. Here is a quick dekko.

Month	Food Inflation (%)	Core Inflation (%)	Headline Inflation (%)
May-24	8.69%	3.12%	4.80%
Jun-24	9.36%	3.14%	5.08%
Jul-24	5.42%	3.39%	3.60%
Aug-24	5.66%	3.40%	3.65%
Sep-24	9.24%	3.49%	5.49%
Oct-24	10.87%	3.67%	6.21%
Nov-24	9.04%	3.64%	5.48%
Dec-24	8.39%	3.58%	5.22%
Jan-25	6.02%	3.67%	4.26%
Feb-25	3.75%	3.95%	3.61%
Mar-25	2.69%	4.10%	3.34%
Apr-25	1.78%	4.07%	3.16%
May-25	0.99%	4.17%	2.82%

Data Source: MOSPI & Ministry of Finance Estimates

Here is what we read from the inflation time series table.

• Food inflation for May 2025 at 0.99% is down 988 bps from the peak of October 2024. Headline inflation has fallen progressively in last 7 months by 339 bps. Food inflation for May 2025 is sharply lower than the previous 12-month average of 6.74%.
• Core inflation remained elevated at 4.17% in May 2025. Once again, gold prices have played a key role in higher core inflation. Average core inflation in last 12 months was 3.60%; so, May core inflation at 4.17% is sharply higher.
• What about headline inflation? Compared to the average of previous 12 months at 4.49%, May 2025 headline inflation is meaningfully lower at 2.82%. Of course, a lot of hopes are still being built into a normal monsoons this year.

Let us turn to whether; the triggers for falling inflation come from rural or urban India?

NON-FOOD INFLATION: URBAN VERSUS RURAL

Between April 2025 and May 2025, headline inflation moderated from 3.16% to 2.82%. During this period, headline rural inflation fell from 2.92% to 2.59%, while headline urban inflation was actually up from 3.36% to 3.07%. What about food inflation? Between April 2025 and May 2025, headline food inflation moderated from 1.78% to 0.99%. However, rural food inflation fell from 1.85% to 0.95%, while urban food inflation fell from 1.64% to 0.96%. Urban and rural food prices are now almost at par.

Non-Food Basket	Non-Food Weights	Rural Inflation	Urban Inflation	Headline Inflation
Clothing	6.32	2.65	2.95	2.80
Footwear	1.04	1.94	2.54	2.18
Clothing and footwear	7.36	2.55	2.82	2.67
Housing	–	–	3.16	3.16
Fuel and light	7.94	2.50	3.31	2.78
Household goods and services	3.75	2.07	1.95	2.00
Healthcare	6.83	4.19	4.53	4.34
Transport and communication	7.60	4.02	3.65	3.85
Recreation and amusement	1.37	1.85	2.94	2.45
Education	3.46	3.91	4.28	4.12
Personal care and effects	4.25	13.49	13.41	13.49
Miscellaneous	27.26	5.22	4.91	5.06

Data Source: MOSPI & Ministry of Finance Estimates

Where is rural India lower and where is urban India lower in non-food inflation? Fuel & lighting saw higher inflation in April. Rural fuel & light inflation was up from 2.17% to 2.50%, while urban fuel & light inflation was down sharply from 4.34% to 3.31%. If you look at the core basket, rural inflation is higher in personal effects and miscellaneous items; while urban inflation is higher in clothing & footwear, health, recreation, and education.

FOOD BASKET: HOW RURAL AND URBAN INDIA STACKED UP?

Food basket, with a weightage of 47.25%, is the most critical swing factor for inflation. In May 2025 food inflation played a key role, tapering from 1.78% to 0.99%.

Food Basket	Food Weights	Rural Inflation	Urban Inflation	Headline Inflation
Cereals and products	12.35	4.82	4.66	4.77
Meat and fish	4.38	-0.40	-0.47	-0.39
Egg	0.49	0.11	1.43	0.64
Milk and products	7.72	2.82	3.69	3.15
Oils and fats	4.21	19.38	15.46	17.91
Fruits	2.88	13.36	12.06	12.74
Vegetables	7.46	-14.00	-13.29	-13.70
Pulses and products	2.95	-8.15	-8.35	-8.22
Sugar and Confectionery	1.70	4.27	3.73	4.09
Spices	3.11	-3.32	-1.79	-2.82
Non-alcoholic beverages	1.37	4.28	5.09	4.56
Prepared meals	5.56	3.76	5.06	4.38
Food Basket	47.25	0.95	0.96	0.99

Data Source: MOSPI & Ministry of Finance Estimates

Here are the key items in the inflation basket across rural and urban segments.

• Let us start with cereals inflation. The overall cereals inflation for May 2025 was sharply lower at 4.77%. The rural cereals inflation at 4.82% is still higher than the urban cereals inflation at 4.66%.
• What about high protein inflation? Overall protein inflation has sobered in May 2025 for milk, eggs, and meat products; with meat inflation in the negative. The fall in high protein inflation has been sharper in rural areas.
• Vegetables inflation moderated in the last 6 months from 26.56% to -13.70% in May 2025. Fall in vegetables inflation was sharper in rural areas. Fruits inflation tapered in May 2025, but is still elevated at 12.74%.

Not only is headline inflation at a 75-month low, but even food inflation is at multi-year lows as the current level of 0.99%.

FURTHER RATE CUTS LOOK UNLIKELY FOR NOW

With the RBI cutting repo rates by 50 bps in June 2025, the RBI has already cut rates by 100 bps from 6.5% to 5.5%. While the repo rates are still about 35 bps higher than the pre-COVID levels of 5.15%, the RBI may be cautious due to the tariff factor. Hence despite the tantalizing lower food inflation, the RBI may choose to hold status quo on rates. The Q4 GDP at 7.4% was much better than expected, so there are no visible risks to growth. Hence, RBI would prefer to have more options available, should inflation spike from current levels.

There are two other factors that may make another rate cut unlikely. Firstly, any rate cut weakens the rupee and that is something the RBI would not want to risk, especially when it has a $55 billion short position on the dollar. Secondly, the yield spread between the US 10-year benchmark and the Indian benchmark is at a multi-year low of 1.7%. This is already restricting the flow of FPI money. RBI may choose to maintain status quo on rates for now!