(source : ANI) ( Photo Credit : ani)
India’s Retail Inflation Rises Slightly in August, But Experts Say It’s Under Control
India’s retail inflation saw a small uptick in August, climbing to 2.07 percent from 1.61 percent in July, according to fresh data from the Consumer Price Index (CPI). This modest rise of 46 basis points keeps inflation comfortably within the Reserve Bank of India’s (RBI) target range of 2-6 percent. Economists and business leaders are optimistic, pointing to temporary factors and upcoming GST reforms as reasons why this won’t derail the country’s price stability.
Food prices, which stayed steady for months, started picking up a bit this time. Still, India has handled inflation better than many other countries, even as global economies grapple with rising costs. The RBI has kept its key repo rate at 6.5 percent for 11 straight meetings before finally cutting it in February 2025 after nearly five years. In its latest Monetary Policy Committee (MPC) update, the RBI lowered its inflation forecast for 2025-26 to 3.7 percent from 4 percent, signaling a positive outlook.
Hanna Luchnikava-Schorsch, Head of Asia-Pacific Economics at S&P Global Market Intelligence, says the numbers matched their predictions. "India’s headline CPI inflation rose to 2.1 percent year-on-year in August from 1.6 percent in July, just as we expected," she explained. She attributes the increase to fading base effects, strong consumer demand, and a slightly weaker rupee. Looking ahead, Luchnikava-Schorsch expects inflation to pick up speed but stay manageable. "GST rate cuts should slow this down from October, keeping CPI inflation close to the RBI’s 4 percent midpoint through 2025," she added. S&P Global now forecasts an average CPI inflation of 3.3 percent for FY26, down from their earlier 3.5 percent estimate.
The PHD Chamber of Commerce and Industry (PHDCCI) is upbeat about the data. They link the slight inflation rise to easing pressures in major categories and see more relief coming. "We expect CPI inflation to drop further, thanks to the GST 2.0 reforms," said Hemant Jain, PHDCCI President. He highlighted how the proposed two-tier GST structure could cut production costs, lower prices, and boost consumer spending.
Rajani Sinha, Chief Economist at CareEdge, calls the August figure "comfortable" despite the nudge upward. "Inflation inched up as the favorable base effect faded and food prices exited deflation, but it stayed low due to tame food inflation," she noted. Sinha predicts food inflation will remain moderate, backed by good agricultural output. "A strong monsoon, full reservoirs, and robust kharif sowing all point to stable food prices," she said. Plus, GST rationalization could shave off 70-90 basis points from CPI inflation each year if benefits pass on to consumers. CareEdge has now revised its FY26 inflation projection to 2.7 percent from 3.1 percent.
Dharmakirti Joshi, Chief Economist at Crisil, agrees on the downward trend. "With lower-than-expected food inflation and easing core inflation from GST cuts, we’ve cut our forecast to 3.2 percent for this fiscal from 3.5 percent," he said. This could open the door for RBI to trim the repo rate by another 25 basis points later in the year.
Not everyone is as relaxed, though. Soumya Kanti Ghosh, Chief Economic Adviser at State Bank of India, urges caution. "With August inflation just above 2 percent, a rate cut in October seems tough. Even December might be tricky if growth in the first two quarters disappoints," he warned.
The next CPI inflation data for September 2025 will drop on October 13, or the next working day if it’s a holiday. As India navigates these trends, GST reforms and steady RBI moves look set to keep retail inflation in check, supporting economic growth for everyone.
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