India’s retail inflation cooled sharply to 1.55% in July 2025, its lowest level in eight years since July 2017, according to provisional government data. This marked a 55-basis-point drop from June’s 2.10%, driven mainly by a steep fall in food prices. Food inflation slipped into deep negative territory at -1.76%, the lowest since January 2019, as both rural (-1.74%) and urban (-1.90%) regions recorded deflation in this category.
The decline was supported by favourable base effects and lower prices in essentials such as pulses, vegetables, cereals, and in services like transport, communication, and education. Even items like eggs and sugar saw notable price drops. Rural headline inflation fell to 1.18% from 1.72% in June, while urban inflation eased from 2.56% to 2.05%.
Other segments displayed a mixed picture: housing inflation held steady at 3.17%, education inflation eased to 4%, while health inflation inched up to 4.57%. Transport and communication costs dropped sharply to 2.12%, but fuel and light inflation edged up slightly to 2.67%.
Economists believe the data may indicate inflation has bottomed out. Sachchidanand Shukla, Group Chief Economist at L&T, told Reuters that although benign readings may continue in the short term due to the low base, exit inflation for FY26 could be three times higher than current levels. Sakshi Gupta, Principal Economist at HDFC Bank, noted that the moderation was expected and aligned with the RBI’s lowered inflation forecast. She added that if India’s tariff rates hover at 25% or above, the central bank might have scope for another rate cut in October.
