India’s retail inflation measured by the Consumer Price Index (CPI) has eased significantly in July 2025, falling to 1.55%, marking the lowest reading in over eight years. The last time inflation was this low was in June 2017, when it stood at 1.46%.

The latest inflation figures were released by the Ministry of Statistics and Programme Implementation, highlighting a notable decline in price pressures across key consumption categories.

The sharp slowdown in inflation was primarily driven by a moderation in food prices, which form a significant part of India’s CPI basket. Prices of vegetables, cereals, and pulses saw a drop compared to previous months. Additionally, fuel prices remained stable amid a relatively calm global crude oil market, further helping to ease inflationary pressures.

Drivers of the Decline

Economists point out that a good monsoon season and improved supply chain efficiencies contributed to lower food inflation. Vegetables, which often see sharp price spikes due to supply disruptions, recorded a year-on-year decline. Core inflation — which excludes volatile food and fuel prices — also remained stable, reflecting subdued demand pressures in the economy.

Historical Context

In June 2017, retail inflation hit a low of 1.46% largely due to similar food price corrections. However, that period was followed by a steady climb as crude prices and global commodity costs rose. The present scenario is somewhat different as both global and domestic demand have shown moderate growth, keeping price pressures contained.

Implications for Monetary Policy

The Reserve Bank of India (RBI) has been monitoring inflation trends closely, as the Monetary Policy Committee (MPC) is mandated to keep inflation at 4% with a tolerance band of ±2%. With inflation now well below the lower end of this range, analysts expect the RBI may consider a monetary policy easing in the upcoming review to support economic growth.

However, some experts caution against aggressive rate cuts, as ultra-low inflation might be temporary and could rise again if food or fuel prices spike.

Impact on the Economy

For consumers, low inflation means greater purchasing power as their cost of living does not rise sharply. This could encourage higher spending in the short term, benefiting the retail and services sectors. For businesses, particularly those reliant on raw materials, stable prices help in better cost planning and profitability.

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