India’s consumer inflation eased further in June, dropping to 2.1%, according to government data released on Monday. This was below economists’ forecast of 2.5%, marking the eighth consecutive month of declining inflation—the longest stretch in over six years.
The main factor behind this trend was a sharp fall in food inflation, which turned negative at -1.06% in June compared to 0.99% in May, driven by strong agricultural output and favourable weather.
The Reserve Bank of India (RBI) welcomed the easing inflation, allowing more room for monetary easing after its sizeable 50 basis point rate cut in May. RBI Governor Sanjay Malhotra noted that “record wheat production and a higher harvest of key pulses in the spring crop season ‘should ensure adequate supply of key food items,’” helping to keep food inflation low.
HSBC also highlighted the positive impact of good weather, stating, “Aided by a good weather outcome, we expect inflation to average about 2.5% over the next six months.”
The bank added that “a good monsoon will help contain inflation, boost real wages, and raise the purchasing power of informal sector consumers.”
India’s economy remains resilient, with GDP growth of 7.4% in the quarter ending March.
However, risks persist from unpredictable weather and ongoing trade tensions. India is negotiating a trade deal with the United States ahead of an August 1 tariff deadline, after which import duties of up to 26% could be imposed.
An Indian delegation is expected to visit Washington for talks, while India has also proposed retaliatory tariffs at the World Trade Organisation in response to U.S. tariffs affecting $2.89 billion of Indian exports.
Going forward, inflation trends will be closely monitored as they influence monetary policy and economic growth, with agricultural output and global trade developments playing key roles.