India’s retail inflation is set to cool down to 3.1 per cent in FY26, thanks to dropping food prices and recent GST rate cuts, according to a fresh report from Bank of Baroda (BoB). This positive outlook comes as the economy shows signs of disinflation, boosted by government efforts to lower indirect taxes and pass on the benefits to everyday consumers.
In August, CPI inflation—the key measure of retail inflation—rose slightly to 2.07 per cent from 1.61 per cent in July. Still, it’s way below last year’s 3.7 per cent level. Food inflation kept falling for the third month in a row, down 0.7 per cent year-on-year, mainly because vegetable, pulse, and spice prices eased off. Better sowing, stronger arrivals of rice and pulses, and a solid monsoon are all helping keep food inflation low.
Bank of Baroda experts point out that headline CPI inflation is getting a real boost from this tame food inflation trend. With above-normal monsoon rains, healthy reservoir levels, and improved crop sowing—especially for rice and pulses—food prices should stay subdued in the months ahead. On top of that, shifting most food, beverages, and core items to lower GST slabs will likely push overall inflation even lower.
That said, food inflation is starting to tick up from rock-bottom levels, partly due to a statistical low-base effect. The deflation in food eased to -0.7 per cent in August from -1.8 per cent in July. Fuel and light inflation hit 2.4 per cent year-on-year, with a small uptick from rising kerosene prices.
Meanwhile, an SBI Research report suggests a Reserve Bank of India (RBI) rate cut in October looks unlikely, as August’s inflation reading topped the 2 per cent mark. Even a cut in December could be tough, considering first-quarter growth data and estimates for the second quarter. As India navigates these inflation trends, lower food prices and GST relief could bring some much-needed relief to households.
Stay informed on all the latest news, real-time breaking news updates, and follow all the important headlines in world News on Latest NewsX. Follow us on social media Facebook, Twitter(X), Gettr and subscribe our Youtube Channel.
