India’s Inflation Hits 75-Month Low – Is Another Rate Cut on the Horizon?

Chirayu Joshi
Jun 14
2 min read

India’s economic landscape took a notable turn in May 2025, with retail inflation (CPI) dropping to 2.82%, the lowest in over six years. This development has intensified conversations around the Reserve Bank of India’s (RBI) next move — could another repo rate cut be around the corner?

As a management consulting firm guiding businesses through financial uncertainty, Infosential LLP breaks down what this means for your business and investments.

Inflation at Multi-Year Lows: The Numbers Behind the Narrative

According to data released by the Ministry of Statistics and Programme Implementation (MoSPI), headline CPI inflation for May 2025 cooled to 2.82%, driven largely by:

A sharp moderation in food inflation (down to ~1%)
Stable fuel and housing prices
A high base effect from May 2024

Independent forecasts, including one from Bank of Baroda, pegged inflation even lower at 2.7%, making it the lowest CPI print since early 2019 (75 months).

RBI’s Bold Response in June 2025

Earlier this month, the Monetary Policy Committee (MPC) delivered a surprise:

Repo rate cut of 50 basis points, bringing it down to 5.50%
CRR (Cash Reserve Ratio) reduction of 100 basis points
Shift in stance from “accommodative” to “neutral”

The RBI’s statement reflected a dual focus — taming inflation while supporting growth, projected at ~6.5% for FY26.

What Market Analysts Are Saying

Major financial institutions are split but cautiously optimistic:

HSBC Global Research anticipates inflation averaging around 2.5% for the next 6 months, suggesting room for further cuts.
Morgan Stanley believes additional easing may be needed to sustain private investment and consumption.
On the other hand, Nomura and MUFG advise a more measured approach, expecting another cut possibly by Q4 2025.

Infosential LLP’s View

We believe the RBI’s proactive monetary stance indicates a higher probability of a follow-up rate cut, possibly as early as August 2025, provided:

Inflation remains firmly below 4%
Global commodity and crude oil prices stay stable
Monsoon and rural consumption trends remain favorable

For businesses, especially MSMEs and leveraged enterprises, the coming months present an opportunity to refinance, restructure, and reinvest under more favorable borrowing terms.

What Should Businesses and Investors Do Now?

Monitor RBI commentary closely – especially in July and August
Lock in debt instruments or term loans at current rates before further cuts
For investors: Rebalance fixed income portfolios to anticipate lower yields
For CFOs: Reevaluate cost of capital and project feasibility assumptions

Final Word

With inflation at historic lows and a neutral stance from the central bank, the path is wide open for a further rate cut. At Infosential LLP, we remain bullish on policy support and encourage clients to stay agile and forward-looking in this rate-sensitive environment.

Want to discuss how this rate environment impacts your business or portfolio?

Reach out to Infosential LLP for customized financial insights and consulting.