India’s Retail Inflation Eases To 8-Year Low Of 1.5% In July As Vegetable, Pulses Prices Plunge

India's annual retail inflation slowed to 1.55% in July from 2.1% in June, the lowest in eight years. It also marked a ninth straight month of declines. This was led by a steep drop in food prices, even as fuel costs saw a marginal increase. 

Food inflation, which is a significant part of the consumer price index, came in at -1.76%, lower than -1.01% in June, its lowest in six years. Vegetable inflation dropped to -20.69% from -19% in June, and pulses inflation fell to -13.76% from -11.76%. 

Food prices have been the main driver for slowing inflation this year as adequate rainfall boosted the output of agricultural goods.

In July, rural inflation stood at 1.18%, down from 1.72%, while urban inflation eased to 2.05% from 2.56%. 

On the other hand, fuel and light inflation increased to 2.67% from 2.55% in June. 

The Macro Picture: RBI’s Inflation Projections

Earlier this month, the Reserve Bank of India’s Monetary Policy Committee (MPC) kept repo rates unchanged at 5.50%, while revising its FY26 Consumer Price Index (CPI) inflation forecast down to 3.1% from 3.7%. The quarterly projections show estimates at 2.9% in Q1, 3.4% in Q2, 3.9% in Q3, and reaching 4.4% in Q4.

In a press release earlier this month, RBI Governor Sanjay Malhotra said the inflation outlook for 2025-26 is now “more benign” than projected in June, supported by a favourable base effect, steady southwest monsoons driving healthy kharif sowing, and ample buffer stocks of foodgrains.

Barring any major negative shock to input prices, core inflation is likely to remain moderately above 4% during the year, he added. 

The Tariff Overhang

Looking ahead, economists will be watching the ongoing trade deal negotiations between the U.S. and India for any inflationary risks. Earlier this month, the US President imposed 25% tariffs on Indian goods, followed by another 25% penalty targeting India’s purchase of oil from Russia. 

Focus Shifts To Next Policy Meeting 

With the next RBI meeting scheduled for September 29-October 1, the central bank is widely expected to maintain its ‘neutral’ stance on rates. While inflation remains in control, the tariff uncertainty may weigh on further easing measures. 

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