Retail inflation eases to 1.55% in July

India's retail inflation in July fell to an eight-year low of 1.55%, remaining below the Reserve Bank of India's (RBI) 2-4% target range for the fifth consecutive month. This decline, the weakest increase since June 2017, was primarily driven by a significant drop in food prices, which saw their biggest decline since at least January 2019 at 1.76%. The fall in food prices, which dipped more in urban areas than rural areas, was attributed to strong monsoon rains boosting farm output. While this low inflation rate is supportive of a growth-oriented monetary policy, it also raises concerns about potentially lower farm incomes due to the steady fall in food prices. The RBI had noted earlier in August that headline inflation was lower than projected mainly due to the volatility of food prices, especially vegetables. Economists anticipate that food inflation will remain subdued going forward, pointing to strong monsoon progress, ample reservoir levels, and robust Kharif sowing as factors contributing to steady agricultural output and price stability.
The latest retail inflation data comes after the RBI's Monetary Policy Committee kept the repo rate unchanged at 5.5% in its bi-monthly meeting in August. The RBI has retained its GDP growth forecast for FY26 at 6.5%, while revising its inflation forecast for the same period from 3.7% to 3.1%. However, some economists see a greater chance of a rate cut given the lower-than-expected inflation figure. The benign inflationary trend is seen as favourable for a sustainable improvement in consumption demand, and the decline in inflation is expected to buoy household purchasing power, particularly for lower-income segments. This trend also creates room for further monetary policy easing, which would benefit interest-sensitive consumption segments. Core inflation, which excludes volatile items like food and energy, stood at a stable 4.1% in July 2025, indicating stable demand conditions in the economy.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.