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Informist, Tuesday, Aug. 5, 2025
By Shubham Rana
MUMBAI – Retail inflation in India likely fell to a record low of 1.3% in July mainly because of the statistical effect of a high base and lower food prices, according to an Informist poll of 11 economists. CPI inflation was at 2.10% in June, the lowest since January 2019, and 3.60% a year ago.
At 1.3%, retail inflation would be the lowest in the current CPI series, which has data from 2014. The lowest CPI inflation print in the current series is 1.46% in June 2017. Headline inflation has also been below 2% only twice in this series.
July will be the ninth consecutive month when inflation has moderated from the previous month. This will also be the sixth consecutive month when CPI inflation is below the Reserve Bank of India's medium-term target of 4.0%.
The record low inflation print could provide the RBI's Monetary Policy Committee space to support growth. The rate-setting panel is expected to leave the repo rate unchanged at 5.50% Wednesday, having lowered it rate by 100 basis points so far in 2025, including a cut of 50 bps in June.
The estimates for July CPI inflation range from 1.2% to 1.8%. The statistics ministry will release CPI data for July at 1600 IST on Aug. 12.
BASE EFFECT
The base effect in July is such that if the overall index remains unchanged from June, retail inflation would fall to 0.6% in July. An inflation rate of 1.3% in July would translate to a 0.7% rise in the overall index from June, which would be the highest sequential rise in nine months.
Typically, the overall index rises sequentially during the summer months, mainly because of a rise in vegetable prices. On an average, the overall index has risen 1.3% on month in July in the last 12 years.
The sequential rise is likely to be driven by higher tomato prices, which rose 31% month-on-month in July, as per data from the Department of Consumer Affairs. Retail prices of other vegetables such as onion and potato also rose 5% and 2%, respectively, on month in July.
However, overall food prices were likely lower on year in July and helped bring headline inflation down to a record low. According to Nirmal Bang Institutional Equities, food and beverage inflation is seen falling to (-)1.8% in July from (-)0.2% in the previous month.
Core inflation--which excludes volatile food and fuel items--also likely moderated in July as gold prices remained steady, economists said. Core inflation is expected to have declined to 4.2% last month from a 21-month high of 4.4% in June.
The following is a summary of the poll on CPI inflation in July:
| ORGANISATION | CPI INFLATION ESTIMATE |
| QuantEco Research | 1.19% |
| Kotak Mahindra Bank | 1.2% |
| Nirmal Bang Institutional Equities | 1.21% |
| Union Bank of India | 1.24% |
| IDFC FIRST Bank | 1.3% |
| Societe Generale | 1.3% |
| Sunidhi Securities | 1.36% |
| HDFC Bank | 1.4% |
| ICRA | 1.4% |
| CareEdge Ratings | 1.7% |
| India Ratings and Research | 1.8% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Rajeev Pai
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