Retail inflation in India drops to 8 year low of 1.55%: food inflation remains negative for the second month

By: Team India Tracker

Food inflation stayed in negative territory for the second month in a row, deepening to -1.76 percent from -1.1 percent in June, driven by lower prices of pulses, vegetables, cereals, eggs, sugar, and transport.

India’s retail inflation cooled to an eight-year low of 1.55 percent in July, easing from 2.1 percent in June, according to official data released on August 12. This marks the first time since January 2019 that the figure has dipped below the 2 percent threshold. The decline extends a six-month streak of sub-4 percent inflation, with the average rate since April holding under 3 percent.

Food inflation stayed in negative territory for the second month in a row, deepening to -1.76 percent from -1.1 percent in June, driven by lower prices of pulses, vegetables, cereals, eggs, sugar, and transport. Vegetable prices fell sharply by 20.7 percent year-on-year, while pulses dropped 14 percent. Meat and fish inflation remained negative for the fourth consecutive month. In contrast, fruit prices surged 14.4 percent compared to 12.6 percent in June, and oils and fats saw a steep 19.2 percent rise

Source: Ministry of Statistics and Programme Implementation

Rural inflation eased to 1.18 percent in July from 1.72 percent in June, while urban inflation dropped to 2.05 percent from 2.56 percent. Among non-food categories, miscellaneous inflation stayed elevated at 5 percent, though slightly lower than June’s 5.5 percent. Personal care and effects prices jumped 15 percent, reflecting the impact of higher gold and silver rates.

At its latest policy meeting, the Reserve Bank of India trimmed its full-year inflation forecast to 3.1 percent from 3.7 percent, projecting an average of 2.1 percent in the second quarter, rising to 3.1 percent in the third, and ending the fiscal year at 4.4 percent in the fourth. However, CPI inflation is expected to climb above 4 percent by the final quarter of 2025–26 due to an unfavourable base effect and demand-side pressures. Core inflation is likely to hover moderately above 4 percent through the year, barring significant shocks to input prices.

The government has mandated the Reserve Bank of India to maintain the retail inflation at 4 percent with a margin of 2 percent on either side for a five-year period ending March 2026. The CPI is heavily weighted by the RBI while formulating its bi-monthly monetary policy. 

Dipanwita Mazumdar, Economist at the Bank of Baroda, said, “the current cycle is acting in favour of us when the inflationary impact from tariffs is the centre point of global discussions. We expect the downside risk to global growth will largely keep international commodity prices in check. This is expected to partly negate the higher tariff rates in place.” However, she cautioned that India must remain vigilant in case it is required to halt Russian oil purchases entirely to comply with demands from U.S. President Donald Trump. “In this case, some diversification towards Kuwait and Iraq would also lend support,” she said.

Talking about the wholesale inflation, India’s annual Wholesale Price Index (WPI)-based inflation slipped deeper into negative territory in July 2025, hitting a two-year low of (-) 0.58 percent compared to the same month last year, data from the Commerce and Industry Ministry showed on Thursday. The fall was driven largely by softer prices of food items and fuels, including petrol, diesel, and natural gas.

The July reading was weaker than the -0.13 percent recorded in June, marking a continued decline since March, when wholesale inflation began easing after touching a 14-month low of 0.39 percent in May. The food index contracted by 2.15 percent year-on-year, while fuel prices dropped 2.43 percent. Economists say the sustained drop in wholesale prices could help moderate retail inflation in the coming months, as lower bulk costs filter through to consumers and cheaper fuel reduces transportation expenses.