India’s retail inflation, measured by the Consumer Price Index (CPI), fell sharply to 1.55% in July 2025, according to official data released on August 12. This marks the lowest inflation level since June 2017, and a steep 55 basis-point drop from 2.10% recorded in June 2025. The decline offers significant relief on the inflation front, primarily driven by falling food prices and favourable base effects.
Food inflation, as measured by the Consumer Food Price Index (CFPI), declined further into negative territory at -1.76% in July, compared to -1.01% in June. This is the lowest food inflation reading since January 2019, with notable price drops in vegetables, pulses, cereals, eggs, sugar, and transport costs. Rural and urban areas both recorded food deflation, with rural food inflation at -1.74% and urban at -1.90%.
Headline inflation in rural areas eased to 1.18% in July from 1.72% in June, while urban inflation dropped to 2.05%, down from 2.56% in the previous month. These figures highlight a broad-based easing of price pressures across both regions.
Among the non-food categories, transport and communication inflation witnessed a sharp decline to 2.12% from 3.90% in June. Meanwhile, fuel and light inflation rose slightly to 2.67% from 2.55%. Housing inflation remained steady at 3.17%, education inflation moderated to 4.00%, and health inflation edged up to 4.57% from 4.38% in June.
Clothing and footwear inflation also eased marginally to 2.50%, while overall price momentum remained subdued across most major consumption categories.
At the state level, Kerala recorded the highest combined retail inflation in July at 8.89%, followed by Jammu & Kashmir (3.77%), Punjab (3.53%), Karnataka (2.73%), and Maharashtra (2.28%).
It may be recalled that the Reserve Bank of India (RBI), in its latest monetary policy review, projected CPI inflation at 3.1% for FY2025-26, citing stable food prices driven by a strong monsoon and robust kharif sowing. RBI Governor Sanjay Malhotra noted, "The inflation outlook for 2025-26 has become more benign than expected in June. Large favourable base effects combined with steady progress of the southwest monsoon, healthy kharif sowing, adequate reservoir levels and comfortable buffer stocks of food grains have contributed to this moderation."
However, the RBI also warned of a potential uptick in inflation to above 4% by Q4 FY26, due to waning base effects and demand-side pressures stemming from policy actions. Core inflation, barring major shocks to input prices, is expected to remain moderately above 4% throughout the fiscal year, according to the central bank.
(Inputs from agencies)
