India: Inflation drops to lowest level since January 2019 in June
Latest reading: Inflation fell to 2.1% in June from May’s 2.8%. June’s decline, the ninth consecutive, brought inflation to its lowest level since January 2019. Prices for food and beverages fell in June, reflecting the recently strong harvests following last year’s strong monsoon. Costs for fuel and light grew at a more moderate rate, pointing to the impact of recently falling oil prices on global markets.
Accordingly, the trend pointed down slightly, with annual average inflation coming in at 4.1% in June (May: 4.3%).
Lastly, consumer prices increased 0.62% over the previous month in June, accelerating from May’s 0.21% rise. June’s result marked the highest reading since October 2024.
Outlook: Since April, our panelists have slashed their forecasts for India’s inflation in FY 2025 (April 2025–March 2026) by 0.7 percentage points. Trump’s “reciprocal” tariffs, introduced in April, plus OPEC+’s acceleration of output hikes have depressed the outlook for crude oil prices, reducing fuel costs for net-importer India.
That said, inflation is still set to rise from current lows to above the Reserve Bank of India’s 4.0% target in January–March 2026 (Q4 FY 2025), at which point the lagged effect of lower interest rates will probably begin stoking price pressures.
Overall, in fiscal year 2025, inflation is projected to average below target. Looking ahead, key risks include weather developments—vital for agriculture—as well as U.S. trade policy due to its impact on external demand.
Panelist insight: Commenting on the outlook, EIU analysts said:
“We have revised our consumer price inflation forecast and expect inflation to moderate to 4% and 4.3% in 2025 and 2026 respectively, from 4.3% and 4.6% expected previously. A favourable monsoon outlook and moderating global commodity prices will help to ease inflation.”