By Sarita Chaganti Singh and Aftab Ahmed
NEW DELHI (Reuters) -India’s annual retail inflation slowed to a more than six-year low of 2.10% in June, near the lower range of the central bank’s tolerance band, as food prices continued to ease, making a case for further interest rate cuts.
This was lower than the 2.5% estimated by economists in a Reuters poll.
Retail inflation was at 2.82% in May.
Food prices have been the main driver for slowing inflation this year as adequate rainfall boosted output of agricultural goods.
Inflation in food items – which account for nearly half of the retail inflation index – fell 1.06% in June from a 0.99% rise in the previous month.
Vegetable prices fell 19% year-on-year, compared to an 13.7% fall in May.
“CPI inflation edged further down in June on the back of lower food prices,” said Sakshi Gupta, an economist at HDFC Bank.
The headline and food inflation in June was the lowest since January, 2019, the government’s statistical department said in its release.
The Reserve Bank of India is mandated to not let inflation fall below 2% or rise above 6% for three consecutive quarters.
Prices of cereals rose 3.73% on-year against a 4.77% increase in May, while those of pulses declined 11.76% compared to a 8.22% fall in May.
Easing inflation has given room to the RBI to focus on growth.
In June, the central bank cut its repo rate by a larger-than-expected 50 basis points.
It also trimmed its fiscal 2026 projection for retail inflation to 3.7% from 4% earlier, citing a strong harvest and the early arrival of monsoon rains.
“Given this print and ongoing momentum in food inflation, the annual average inflation for FY26 is likely to be lower than 3.7%,” Gupta said.
RBI governor Sanjay Malhotra said in an interview to a national daily that inflation below the central bank’s current projection could open up policy space and that the RBI will strike the right growth-inflation balance.
“While comfortable inflation opens room for further monetary easing, we expect the RBI to maintain a pause in the coming one-two meetings and remain watchful of the transmission ahead along with global uncertainties,” said Upasna Bhardwaj, economist at Kotak Mahidra Bank.
Core inflation, which excludes volatile items such as food and energy and is an indicator of domestic demand, was at 4.4%-4.5% in June from 4.17%-4.20% in the previous month, according to three economists.
India’s official statistics agency does not publish core inflation data.
(Reporting by Aftab Ahmed; Editing by Janane Venkatraman)
