Deflation in Food Items in India

Deflation in Food Items in India

Why in News Deflation in Food Items in India? 

Recently in June 2025, food inflation dropped to minus 1.06 percent as shown by the Consumer Price Index. This marks the first time since early 2019 that food prices have fallen year‑on‑year according to the Ministry of Statistics and Programme Implementation (MoSPI).

Key Highlights of Recent Food Deflation and Food Inflation in India – June 2025

• Retail Inflation: Retail inflation fell to 2.1 percent in June 2025, as per MoSPI data, this is the lowest level of retail inflation in 77 months, with a similar rate last observed in January 2019.

• The CPI showed that food and beverages became cheaper compared to the same period last year. In June 2024, food inflation stood at a steep 8.4%. 

• Wholesale Price Index: Wholesale Price Index figures from June 2025 also indicated a fall in food prices across several categories. Food articles in the WPI category saw a 3.75% contraction in June 2025. This was steeper than the 1.56% deflation recorded in May 2025, and it reflects a strong downward momentum. 

• • • In June 2024, food inflation in WPI stood at 11.1 percent, making the recent decline a sharp reversal.

• The overall food group, including both primary and manufactured food products, also recorded a 0.3% contraction.

• Food Items: The deflationary trend was most visible in vegetables, which saw a noticeable reduction in prices. Prices of items like pulses and spices declined, helped by steady supply and improved farm output. Even meat and fish, which usually show price rigidity, recorded slight declines. 

• • The food and beverages group in CPI reflected a reduction of 0.2 percent in June 2025. This is particularly significant because the same category reported a sharp rise of 8.4% in June 2024.
  • Food inflation has been softening for eight straight months as per official records.

Reasons Behind the Falling Food Prices in India 2025

• Improved Agricultural Output: One of the major contributors to lower food prices was the strong agricultural performance in early 2025. Early and evenly distributed monsoon rains supported agricultural production during the cropping season.

• According to the India Meteorological Department, rainfall patterns remained close to the long-period average during the pre-kharif and kharif crop periods. This led to better-than-expected output in several staples such as rice, pulses, and vegetables.

• Base Effect: Another technical factor influencing the fall in food inflation is the base effect. In June 2024, food inflation stood at 8.4%, one of the highest rates in recent years. This statistical effect played a key role in pulling down year-on-year inflation rates in June 2025.

• Food Supply Chains: Food distribution infrastructure has shown clear improvement in 2025. Enhanced cold storage capacity, more efficient public distribution systems, and better rural road connectivity contributed to reducing spoilage. This meant that a larger portion of agricultural output reached markets without delay.  

• States like Maharashtra, Punjab, and Andhra Pradesh led in improving cold chain logistics this year, according to reports from the Ministry of Agriculture and Farmers Welfare.

• Crude Oil Price: The Wholesale Price Index (WPI) data from June 2025 showed that crude petroleum and natural gas prices fell by 12.3%, continuing a trend of monthly declines that began in September 2024. This reduction lowered the cost of operating tractors, food processing machinery, and long-distance transportation.  

• Additionally, retail fuel inflation decreased to 2.55% in June 2025, from 2.84% in May, making market delivery operations cheaper and more predictable.

What Food Deflation Means and Its Impact?

• About: Food deflation refers to a consistent decrease in the prices of food products over a specific period. When food prices drop compared to the same time in the previous year, inflation enters negative territory.

• Factors: Deflation in food can happen due to a range of factors. These include bumper agricultural production, lower input costs, improved transportation, and strong government intervention to release food stocks. External factors like falling global commodity prices or a decline in crude oil rates also reduce overall food costs in markets.

• Impact:

• • Households benefit directly from falling food prices. Since food is a major component of monthly expenses—especially for low- and middle-income families—any reduction offers immediate financial relief. 
  • Deflation in food allows families to spend less on essential groceries and redirect savings toward healthcare, education, or savings.
  • This enables the Reserve Bank of India (RBI) to maintain or cut interest rates, potentially supporting economic growth.
  • When wholesale prices of vegetables or grains fall below the cost of cultivation, farmers face income losses. According to the National Sample Survey Office (NSSO), nearly 70% of Indian farmers operate on small or marginal landholdings and are highly sensitive to price fluctuations.
  • If market prices remain below the Minimum Support Price (MSP), farmers either incur losses or avoid selling entirely. This disrupts market equilibrium.
  • Food deflation can signal weak demand or overproduction, leading to imbalances in rural economies.