Daijiworld Media Network - New Delhi
New Delhi, Jun 12: India’s retail inflation, measured by the Consumer Price Index (CPI), dropped sharply to 2.82% in May — its lowest level since February 2019 — according to the Ministry of Statistics. This steep decline signals a strong turnaround in price pressures and has prompted significant policy moves by the Reserve Bank of India (RBI) to stimulate economic growth.
Food inflation, a major component of the CPI, slipped to just 0.99% — its lowest since October 2021 — marking the seventh consecutive month of decline. The drop is attributed to increased agricultural output and falling prices of essentials such as pulses, cereals, vegetables, fruits, eggs, sugar, and household goods.
Additionally, the moderation in international crude oil prices contributed to easing fuel inflation, helping bring down the overall price levels.
With inflation falling well below the central bank’s 4% target, the RBI revised its inflation forecast for the 2025-26 financial year downwards from 4% to 3.7%. Quarter-wise projections are: Q1 at 2.9%, Q2 at 3.4%, Q3 at 3.9%, and Q4 at 4.4%.
RBI Governor Sanjay Malhotra noted that inflation had softened significantly from above the tolerance band in October 2024 to well below the target in recent months. “We are now confident of a durable alignment with our target and even foresee undershooting the 4% level at times this year,” he said.
As a result of this easing trend, the RBI took aggressive steps in its latest monetary policy review:
• Repo rate cut by 50 basis points, bringing it down from 6% to 5.5%.
• Cumulative repo rate cut now stands at 100 basis points since February.
• Cash Reserve Ratio (CRR) slashed by 100 basis points, from 4% to 3%, in four phased tranches — expected to inject Rs 2.5 lakh crore into the banking system.
While food prices appear stable, the RBI expects core inflation to remain subdued amid a global slowdown and softening commodity prices.
However, with limited room for further rate cuts, the central bank has shifted its stance from “accommodative” to “neutral,” signaling a more balanced approach going forward to maintain both inflation control and growth momentum.