Is India’s CPI Inflation Dropping to 2.82% in May the Lowest Since February 2019?

New Delhi, June 12 (NationPress) The inflation rate in India, as per the Consumer Price Index (CPI), has dipped to 2.82 percent in May this year, marking a decrease compared to the same month last year. This figure represents the lowest retail inflation recorded since February 2019, as reported by the Ministry of Statistics on Thursday.

Food inflation also saw a significant drop, falling to 0.99 percent in May, the lowest level since October 2021. This marks the seventh consecutive month of declining food inflation, attributed to an increase in agricultural output.

The notable fall in inflation for the month is largely due to decreases in the prices of pulses, vegetables, fruits, cereals, household goods & services, sugar, and eggs, as outlined in the official statement.

Additionally, inflation rates have been moderated by a decrease in fuel prices, coinciding with a drop in international crude oil prices during the month.

The Reserve Bank of India (RBI) has also adjusted its inflation forecast for 2025-26 downward, revising it from 4 percent to 3.7 percent, as stated by Reserve Bank Governor Sanjay Malhotra on Friday.

The projected CPI inflation for the financial year 2025-26 is now set at 3.7 percent, with quarterly estimates of 2.9 percent for Q1, 3.4 percent for Q2, 3.9 percent for Q3, and 4.4 percent for Q4.

Governor Malhotra highlighted that inflation has significantly softened over the past six months, dropping from above the tolerance band in October 2024 to well below the target, indicating a widespread moderation. The outlook for the near and medium term suggests a sustainable alignment of headline inflation with the 4 percent target, and it is expected to potentially undershoot that target as well.

While the food inflation outlook appears soft, core inflation is anticipated to remain moderate due to easing international commodity prices amid a projected global growth slowdown, Malhotra noted.

The steep decline in inflation has prompted the RBI to implement a 50 basis points cut in the repo rate, lowering it from 6 percent to 5.5 percent to foster economic growth during last week's monetary policy review.

The RBI has also announced a 100 basis point reduction in the Cash Reserve Ratio (CRR), decreasing it from 4 percent to 3 percent, which will be carried out in four installments of 25 basis points each. This move is expected to release Rs 2.5 lakh crore into the banking system, enhancing liquidity and supporting credit flow.

Governor Malhotra mentioned that the repo rate has now been reduced by 100 basis points in quick succession since February this year, limiting the RBI’s available space for further cuts, thereby shifting the monetary policy stance from accommodative to neutral. This allows the RBI to closely monitor the overall dynamics between growth and inflation.