Question
As per the July 2025 FSR, India’s domestic Consumer
Price Index (CPI) inflation dropped to what level in May 2025, marking a six-year low?Solution
Explanation:
The FSR points out that domestic CPI inflation fell to 2.8% in May 2025 , which is the lowest in six years.
- This sharp decline demonstrates price stability and easing of demand-side as well as supply-side pressures.
- Inflation at 2.8% falls below the RBI’s medium-term target of 4% (with tolerance band 2–6%), reflecting a disinflationary trend.
- Contributing factors include lower food and fuel price pressures, softer global commodity prices due to slower international growth, and strong domestic supply chains.
- However, the report also cautions that imported inflation risks remain due to uncertainties like Middle East tensions.
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