Newsletter
India’s retail inflation dropped to 2.10% in June which is the lowest year-on-year print since January 2019.
CPI, or Consumer Price Index, is a measure of how much prices of everyday things like food, fuel, and rent are going up or down.
The deets: the sharp slide was powered by a deep drop in food prices. Food inflation turned negative at -1.06%, compared to +0.99% in May. Vegetables led the slide, with prices falling 19% year-on-year (vs -13.7% in May), while pulses followed suit with an 11.76% dip.
This broad-based food deflation signals a strong disinflationary trend in the system.
Other essentials also stayed tame.
- Fuel and light inflation eased to 2.55% from 2.78%
- Clothing & footwear slowed to 2.55% from 2.67%
- Housing saw a slight uptick to 3.24% from 3.16%
The softening was more visible in the countryside. Rural inflation fell to 1.72% from 2.59%, while urban inflation cooled to 2.56% from 3.07%.
Why it matters: a sub-3% CPI print is big news for the RBI, which targets 4% inflation with a 2% tolerance band. With CPI now closer to the lower end of that band, there could be more room for a policy shift or at least, less pressure to hike rates.
The only wrinkle? a sharp monsoon impact or commodity price spike could flip the script. But for now, the inflation beast seems tamed.
