India’s CPI Inflation Hits 77-Month Low at 2.10% in June 2025: SBI Research

Varahimedia.com ,Mumbai, July 15, 2025:India’s Consumer Price Index (CPI) inflation dropped to a 77-month low of 2.10% in June 2025, down from 2.82% in May 2025 and 5.08% in June 2024, according to the latest SBI Research Ecowrap report. This significant decline is primarily attributed to falling food inflation, which also hit a 77-month low at -0.20%.

🔻 Key Drivers of the Inflation Decline

• Vegetable prices plummeted by -19.0%, continuing a strong downward trend.
• Pulse prices fell -8.2%, while spices and meat & fish prices also showed a decline.
• Fruit inflation eased slightly to 12.59%, and oil & fats inflation dropped to 17.75%.

🔼 Persistent Inflation in Key Sectors

Despite the overall decline, inflation rose in the following segments:

• Housing: Up by 68 bps to 3.24%
• Fuel & Light: Increased by 622 bps to 2.55%
• Miscellaneous Items: Rose by 207 bps to 2.55%, with personal care items rising to 14.76%

Threshold Diffusion Index Insights

The threshold diffusion indices, which reflect the breadth of inflation across categories, remained below the 50 mark, indicating subdued price increases:

• Index above 6% threshold: 18
• Index above 4% threshold: 32

CPI-WPI Divergence Remains

• WPI inflation entered negative territory in June 2025, even as CPI moderated to 2.1%.
• Divergence in specific items:
  • WPI inflation was higher for cereals, pulses, fruits, oils & fats, vegetables
  • CPI inflation was higher for milk, sugar, egg, pan, clothing, and tobacco
  • Fuel & Light saw deflation in WPI, but mild inflation in CPI

Global Commodity Trends

• Global commodity prices have been declining over the last four months, except for fertilizers and precious metals.
• In June 2025:
  • Gold prices surged 44% YoY
  • Silver prices rose 21.7% YoY
• Overall, both energy and non-energy prices declined, but at a slower pace.

Imported Inflation Rising

• Imported inflation rose for the 13th straight month, now contributing to 71% of total CPI inflation (up from 50% in May).
• Rising gold and silver prices are key drivers.
• Trade tariffs may bring further deflation in sectors like clothing, footwear, and electronics, which together form 10.3% of the CPI basket.

Spatial Convergence Across States

Using a β-convergence model, SBI found signs of regional inflation alignment, suggesting:

• States with initially higher deviation from national inflation are converging.
• This implies better policy transmission, market integration, and price stability.

Outlook and Policy Direction

• SBI expects July 2025 CPI to potentially breach historical lows.
• FY26 average CPI inflation projected at 3.0% to 3.2%, versus 4.6% in FY25 (RBI projection: 3.7%)
• Given the 50 bps repo rate cut in June, RBI may consider another 25 bps cut soon to:
  • Support capital formation
  • Boost growth momentum
  • Balance inflation and growth amid global uncertainties

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