New Delhi: Retail inflation slowed to an 8-year low of 1.55 per cent in July, falling below the Reserve Bank’s comfort zone for the first time since January 2019, helped by subdued prices of food items, according to government data released on Tuesday.
The government has tasked the Reserve Bank to ensure that the consumer price index-based retail inflation remains at 4 per cent with a margin of 2 per cent on either side.
The retail inflation was 2.1 per cent in June and 3.6 per cent in July 2024.
The July 2025 inflation is the lowest since June 2017, when it was at 1.46 per cent.
“The significant decline in headline inflation and food inflation during the month of July, 2025, is mainly attributed to favourable base effect and to decline in inflation of pulses and products, transport and communication, vegetables, cereal and products, education, egg and sugar and confectionery,” said National Statistics Office (NSO).
As per the data, year-on-year food inflation in July was negative at 1.76 per cent. It is the lowest since January 2019.
Inflation in rural India was at 1.18 per cent and 2.05 per cent in urban areas in July.
In July, highest inflation was recorded in Kerala at 8.89 per cent followed by Jammu and Kashmir (3.77 per cent) and Punjab (3.53 per cent). The lowest CPI was in Assam at (-) 0.61 per cent.
Commenting on the CPI data, Aditi Nayar, Chief Economist, Icra said the retail inflation was dampened by the continued year-on-year decline in food prices on an elevated base, even as vegetable prices displayed a surprising uptick.
“The expected uptrend in the forward-looking inflation trajectory, particularly the 4%-plus prints for Q4 FY2026 and Q1 FY2027, would limit the space for rate cuts in the upcoming policy meetings,” she said.
Earlier this month, the Reserve Bank had left the short-term lending rate (repo) unchanged at 5.5 per cent as it appeared to have taken a wait-and-watch approach to assess the full unveiling of US President Donald Trump’s trade policies as well as transmission of past rate cuts.
The RBI has cumulatively reduced the repo rate by 100 basis points since February.
Paras Jasrai, Associate Director at India Ratings and Research, said inflation fell below the target range of the monetary policy committee.
“Normally, this would have sparked alarming concerns for demand in the economy, however, the core inflation which excludes volatile segments such as food and energy, stood at 4.1 per cent in July 2025 indicating stable demand conditions in the economy,” he said.
While unveiling the August monetary policy, RBI Governor Sanjay Malhotra had said CPI inflation is likely to edge up above 4 per cent in the fourth quarter of fiscal 2025-26 and beyond, as unfavourable base effects, and demand side factors from policy actions come into play.
NSO collects price data from selected 1,114 urban markets and 1,181 villages covering all states and UTs.
