India’s retail inflation dipped to more than six-year low of 2.82% in May due to subdued food prices, government data released on Thursday showed. 

This is the fourth consecutive month when inflation has stayed below the Reserve Bank of India’s (RBI) median target of 4%.

Consumer Price Index (CPI)-based retail inflation was 3.16% in April and 4.8% in May 2024. The previous low was in February 2019 at 2.57%.

Food inflation at 0.99% in May was the lowest since October 2021. It was significantly lower than 8.69% in the year-ago month, according to the National Statistics Office (NSO) data.

“The significant decline in headline inflation and food inflation during the month of May 2025 is mainly attributed to a decline in inflation of pulses & products, vegetables, fruits, cereals & products, households goods & services, sugar & confectionary and egg and the favourable base effect,” NSO said in a statement.

Inflation in rural areas was 2.59% in May, while it was 3.07% in urban India.

The RBI, which has been tasked by the government to ensure retail inflation remains at 4% with a margin of 2% on either side, has projected CPI inflation for 2025-26 at 3.7%, with Q1 at 2.9%, Q2 at 3.4%, Q3 at 3.9%, and Q4 at 4.4%.

The data comes almost a week after the RBI-led monetary policy committee (MPC) cut the benchmark repo rate by 50 basis points to 5.5% for the third straight time this year. The repo rate has fallen by 100 basis points since the February cut.

Aditi Nayar, chief economist at Icra, said CPI inflation cooled further in May 2025 to a 75-month low of 2.8%, led by the food and beverages segment, validating the decision of the MPC to front-load rate cuts.

“As of now, we expect rates to be unchanged in the August 2025 policy review. Nevertheless, given our lower inflation and growth forecasts vis-a-vis the projections of the MPC, we are not ruling out the possibility of a final 25 bps rate cut in October 2025, by when the monsoon outturn and its impact on food inflation would be clearer,” Nayar added.