India’s Inflation Falls to 2.1% in June – Lowest in Over 6 Years

India's consumer inflation dropped to 2.1% in June 2025, hitting its lowest level in more than six years, according to official data released Monday. The figure came in below market expectations of 2.5%, reflecting continued easing in food prices and favorable supply-side conditions.

Food Prices Turn Negative, Driving CPI Down

June marked the eighth consecutive month of decline in India’s Consumer Price Index (CPI). Food inflation turned negative, falling to -1.06% in June from +0.99% in May. Analysts attribute this sharp drop to record agricultural output and favorable weather during the harvest season.

RBI Gains Policy Space as Inflation Softens

The decline in headline inflation provides more room for the Reserve Bank of India (RBI) to continue with its monetary easing cycle. The central bank had already delivered a 50-basis-point rate cut in May, citing subdued inflationary pressures.

RBI Governor Sanjay Malhotra noted in May that strong wheat production and a healthy spring crop of pulses would help ensure stable food supplies, keeping inflation contained in the near term.

Positive Outlook: Low Inflation, Strong Growth

According to HSBC, inflation in India is likely to average around 2.5% over the next six months, supported by a high base, strong cereal production, and a good monsoon season.

“A favorable monsoon will help control inflation, increase real incomes, and boost the purchasing power of informal sector consumers,” HSBC stated in a June 30 note.

This could, in turn, stimulate domestic consumption and accelerate economic growth, especially after India recorded a robust 7.4% GDP growth in the quarter ending March.

Trade Tensions with the U.S. Remain a Risk

Despite the positive inflation and growth outlook, Governor Malhotra urged caution, highlighting risks from climate variability and global trade tensions.

India is currently in talks with the United States to avoid import tariffs that are set to take effect on August 1, including a potential 26% duty on certain goods. Failure to strike a deal could impact Indian exports significantly.

Earlier this month, New Delhi proposed retaliatory tariffs at the World Trade Organization (WTO) in response to Washington’s 25% tariff on automobiles and parts, affecting nearly $2.89 billion worth of Indian exports.