The Great Cool-Off: Inflation Tumbles, Household Budgets Rejoice

India's middle class has been endowed with a tremendous boost in economy since India's inflation rate dipped to 2.82 percent in May 2025, the lowest retail inflation in over six years. The Ministry of Statistics confirmed this news and stated that it was the result of various factors such as lower food inflation and falling global crude oil prices.

Key Highlights:

- Consumer Price Index (CPI) based retail inflation dropped to 2.82 percent, a record low since February 2019.
- Food inflation dipped to 0.99 percent, the seventh consecutive month of falling inflation.
- Farm production increased at a high level, reducing food prices.
- Overseas crude oil prices softened, leading to softer fuel prices.
- RBI revised its inflation goal for 2025-26 from the previously stated 4 percent to 3.7 percent.
Economic Impact

- Reserve Bank of India (RBI) cut the repo rate by 50 basis points to 5.5 percent from 6 percent to induce economic growth.
- Cash Reserve Ratio (CRR) was cut by 100 basis points, pumping ₹2.5 lakh crore in the financial system to enhance liquidity.
- Decline in inflation is expected to enhance consumer confidence, purchasing power, and foster economic stability.
Future Outlook

- RBI is expecting CPI inflation in Q1 at 2.9 percent, in Q2 at 3.4 percent, in Q3 at 3.9 percent, and in Q4 at 4.4 percent.
- Core inflation remains strong with easing global commodity prices expected to support further moderation.
- The government hopes for extended respite for the middle class with ongoing efforts to maintain economic stability.

Sources: Ministry of Statistics, Reserve Bank of India, Economic Reports.