India's Retail Inflation Falls to 2.1% in June, WPI Enters Deflationary Territory

Retail inflation in India fell to 2.1% in June, the lowest level in over six years, driven by a decline in food prices. Vegetable and pulses prices saw the steepest fall in years, while wholesale inflation turned negative at -0.13%. Core inflation rose to 4.4%, the highest since September 2023, due to a surge in gold prices and increasing demand. The central bank may maintain status quo in its upcoming reviews.

India's retail inflation fell to 2.1% in June, marking the lowest level in over six years, according to government data released on Monday. This significant drop was primarily driven by a sharp decline in food prices, with vegetable and pulses prices experiencing the steepest fall in recent years. Concurrently, wholesale inflation turned negative at -0.13%, the first negative reading since October 2023 [2].

The Consumer Price Index (CPI) data shows that the headline inflation rate has been on a downward trajectory since May, extending its slide to a more than six-year low. Economists had forecast June inflation at 2.5%, but the actual figure came in at 2.1%, indicating a more substantial decline than anticipated [1].

The decline in food prices, which constitute 24.38% of the Wholesale Price Index (WPI), was particularly notable. Food prices fell 0.26% annually in June, compared to a 3.30% and 1.72% rise in April and May, respectively. This deflation in food prices was further supported by a 22.65% contraction in vegetable prices and a 10.17% increase in fruit prices in June [2].

Wholesale inflation, measured by the WPI, dipped to -0.13% in June, marking the first negative reading since the beginning of the year. This was primarily driven by deflationary trends in food articles, fuel, power, and basic metals. The WPI for all commodities stood at 153.8 in June, down from 154.1 in May, indicating a 0.19% month-over-month contraction [3].

Despite the positive trends in food production and commodity prices, the Reserve Bank of India (RBI) has cautioned against complacency. The central bank has warned that weather-related disruptions and changing global tariffs could still pose inflationary risks. The RBI governor, Sanjay Malhotra, has also emphasized the need to remain vigilant about potential threats to economic growth, such as the ongoing U.S.-India trade negotiations [1].

Core inflation, which excludes volatile food and fuel prices, rose to 4.4% in June, the highest since September 2023. This increase was primarily driven by a surge in gold prices and increasing demand for other commodities. The RBI anticipates that core inflation will remain elevated in the coming months, potentially necessitating further monetary policy adjustments [2].

In conclusion, India's inflation landscape has significantly cooled in June, with retail and wholesale inflation both showing substantial declines. While the central bank may maintain its current monetary policy stance in the near term, it remains alert to potential risks that could disrupt this positive trend. Investors and financial professionals should closely monitor these developments as they unfold.

References:
[1] https://www.cnbc.com/2025/07/14/india-cpi-june-offers-rbi-cut-rates.html
[2] https://www.livemint.com/economy/wholesale-reatail-inflation-food-fuel-power-prices-manufacturing-product-prices-rbi-gdp-growth-economy-11752478993160.html
[3] https://www.business-standard.com/economy/news/india-wholesale-wpi-inflation-data-june-2025-125071400347_1.html