India CPI Preview: Inflation Set to Ease Further in June

India’s retail inflation is expected to cool further in June, consolidating a five-month streak of sub-4% prints and reinforcing the Reserve Bank of India’s scope to remain focused on growth. Our estimates suggest headline CPI could fall to as low as 2.7% yr/yr, down from 2.82% in May and sharply lower than the 5.08% print recorded in June 2024.

The anticipated drop is underpinned by continued easing in food prices, particularly vegetables and pulses, as well as a favourable base effect. High-frequency indicators, such as falling thali costs and subdued mandi prices, corroborate the broad easing trend.

Despite seasonal patterns typically pushing perishables higher in June, we expect the food and beverages component of CPI to decline further. Tomatoes, onions and potatoes—the usual culprits during summer—did see sequential upticks, but the overall trajectory remains well-contained due to last year’s inflated base and healthy supplies. Core inflation, however, may tick slightly higher to around 4.5%, primarily due to base effects and an uptick in gold prices. Underlying demand, buoyed by post-Budget tax relief and early festive spending, could add to the mild firming in non-food categories. Still, the headline inflation is likely to remain subdued, reflecting a still-negative output gap and restrained pricing power in services. This would strengthen the case for a continued pause in rate action, following the central bank’s 100-bps front-loaded easing since February. While upside risks from monsoon variability and imported price pressures remain, the near-term outlook is unambiguously benign.

The June inflation print, due for release on July 12, will be a critical input for the RBI ahead of its August policy meeting. For now, the data suggest an economy operating in a sweet spot—with inflation cooling, core pressures manageable, and policy still tilted toward supporting growth.