India’s retail inflation eased to an over 8-year low of 1.55% in July, aided by cooling food price rises, according to government data. This marks the first time in over six years that inflation has fallen below the Reserve Bank of India’s 2% to 6% tolerance band. It is the lowest year-on-year inflation rate after June, 2017.
Retail inflation in July also eased from 3.16% in April and 3.54% in July 2024, according to government data released on Tuesday.
A Reuters poll of 50 economists had forecast retail inflation in July to ease to 1.76%.
Food inflation, which accounts for nearly half of the Consumer Price Index (CPI) basket, stood at -1.76% as against a contraction of 1.06% last month.
Despite uneven monsoons, a strong spring harvest has helped India keep a lid on food prices, extending the country's longest disinflationary streak in more than a decade.
The data comes nearly a week after the RBI’s Monetary Policy Committee (MPC) left rates unchanged at 5.50% and said the inflation outlook was "more benign". This pause followed three consecutive rate cuts since February, totalling 100 basis points. The committee also retained its Neutral stance.
The benign inflation outlook gives the RBI more room to support the economy, which is under pressure after U.S. President Donald Trump sharply raised tariffs on Indian goods.
Fuel and light prices quickened to 2.67% in July from 2.55% in June.
RBI’s inflation outlook
The central bank’s MPC last week said that inflation is estimated to go up during the last quarter of FY26, as food prices remain volatile, especially vegetable prices.
While the geopolitical uncertainties have abated, global trade marked by incoming tariffs continues to weigh in, the RBI noted.
For the full year FY26, the RBI has projected headline inflation at 3.1%, lower than the 3.70% forecast made in June. However, the CPI is expected to stand at 4.9% in first quarter of FY27, breaching the apex bank's 4% target.
Quarter-wise estimates are: 2.1% in Q2, 3.1% in Q3-, and 4.4% in Q4. The central bank maintained that risks to the outlook are “evenly balanced.” The RBI MPC also noted that the core inflation has remained steady at 4%.
Retail inflation in July also eased from 3.16% in April and 3.54% in July 2024, according to government data released on Tuesday.
A Reuters poll of 50 economists had forecast retail inflation in July to ease to 1.76%.
Food inflation, which accounts for nearly half of the Consumer Price Index (CPI) basket, stood at -1.76% as against a contraction of 1.06% last month.
Despite uneven monsoons, a strong spring harvest has helped India keep a lid on food prices, extending the country's longest disinflationary streak in more than a decade.
The data comes nearly a week after the RBI’s Monetary Policy Committee (MPC) left rates unchanged at 5.50% and said the inflation outlook was "more benign". This pause followed three consecutive rate cuts since February, totalling 100 basis points. The committee also retained its Neutral stance.
The benign inflation outlook gives the RBI more room to support the economy, which is under pressure after U.S. President Donald Trump sharply raised tariffs on Indian goods.
Fuel and light prices quickened to 2.67% in July from 2.55% in June.
RBI’s inflation outlook
The central bank’s MPC last week said that inflation is estimated to go up during the last quarter of FY26, as food prices remain volatile, especially vegetable prices.
While the geopolitical uncertainties have abated, global trade marked by incoming tariffs continues to weigh in, the RBI noted.
For the full year FY26, the RBI has projected headline inflation at 3.1%, lower than the 3.70% forecast made in June. However, the CPI is expected to stand at 4.9% in first quarter of FY27, breaching the apex bank's 4% target.
Quarter-wise estimates are: 2.1% in Q2, 3.1% in Q3-, and 4.4% in Q4. The central bank maintained that risks to the outlook are “evenly balanced.” The RBI MPC also noted that the core inflation has remained steady at 4%.
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