Softening of inflation to provide substantial boost to households, businesses

The softening of CPI inflation would provide a substantial boost to households and businesses, industry chamber PHDCCI said on Thursday.

The retail inflation for May has softened to 2.82 per cent, marking a notable reduction of 34 basis points compared to April (3.16 per cent).

“This is the lowest year-on-year inflation recorded since February 2019 and gives further boost to consumer and industry sentiments,” said Hemant Jain, President of PHDCCI.

The year-on-year inflation rate, based on the All-India Consumer Food Price Index (CFPI), for the month of May compared to May 2024 is 0.99 per cent (provisional), which is the lowest since October 2021.

“This marked softening of headline and food inflation during May 2025 is mainly attributed to the decline in prices of pulses and products, vegetables, fruits, cereals and products, household goods, services, sugar and confectionery, and eggs,” Jain added.

CPI and food inflation also significantly softened in both the rural and urban segments of the economy. In the rural segment, the headline inflation stood at 2.59 per cent (provisional) in May, compared to 2.92 per cent in April, whereas food inflation was observed at 0.95 per cent (provisional) in May, down from 1.85 per cent in April.

“Looking ahead, we expect food inflation to cool further, attributed to the anticipated good monsoon. Moreover, crude prices are expected to stabilise within the range of $60-$65 per barrel in the short to medium term, a development that will substantially boost private final consumption expenditure and, consequently, stimulate higher economic growth,” said Jain.

While this is a structural validation of India's food-price resilience, the soft CPI phase may have hit its cyclical bottom, said Arsh Mogre, Economist Institutional Equities, PL Capital.

“What follows next is a test of how long this sub-4 per cent zone can be sustained before base normalisations, kharif shocks, or geopolitical disruptions reassert themselves into the inflation path,” he noted.