Food inflation, measured by the Consumer Food Price Index (CFPI), turned negative, recording a deflation of -1.06% in June—a steep 205 basis point drop from 1.99% in May. Both rural (-0.92%) and urban (-1.22%) segments experienced deflation in food prices. The last comparable decline was also in January 2019. 
“The significant decline in headline and food inflation during June 2025 is mainly attributed to a favourable base effect and lower inflation in vegetables, pulses, meat and fish, cereals, sugar and confectionery, milk, and spices,” an official statement said.
“The downside surprise was driven by a sharp correction in food prices — the consumer food price index turned negative for the first time since February 2019, led by a steep fall in vegetables and pulses inflation, said Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group.
Rural and urban breakdown
In rural areas, overall inflation eased to 1.72% in June from 2.59% in May, while rural food inflation fell to -0.92% from 0.95%. Urban inflation moderated to 2.56%, down from 3.12%, with urban food inflation falling from 1.01% to -1.22%.
According to Suvodeep Rakshit, Chief Economist at Kotak Institutional Equities (KIE), “The lower-than-expected June CPI print was driven by softening food prices. While core inflation remains elevated due to gold prices, it is relatively benign without that effect. The June CPI data, along with deflation in WPI, offers ample room for the RBI to consider a repo rate cut.”
Core segments show mixed trends
Core inflation categories presented a mixed picture. Housing inflation edged up to 3.24% (from 3.16% in May), education inflation rose to 4.37% (from 4.12%), and health inflation climbed slightly to 4.43% (from 4.34%). Inflation in transport and communication was 3.90%, marginally up from 3.85%, while fuel and light inflation eased to 2.55% from 2.84%.
State-wise trends
Among major Indian states with populations over 50 lakh (as per the 2011 Census), Kerala recorded the highest year-on-year retail inflation in June 2025 at 6.71%, followed by Punjab at 4.67%, and Jammu and Kashmir at 4.38%. Uttarakhand and Haryana also reported relatively high inflation rates at 3.40% and 3.10%, respectively.
Outlook
CPI inflation for FY2026 is likely to be well below the RBI’s projection of 3.7%. “While we expect the RBI to maintain a pause in its August policy as it assesses the impact of monsoon on food prices, the softer June print raises the probability of a 25-basis-point rate cut in October,” Rakshit added.
