New Delhi: India’s retail inflation cooled to just 1.55% in July 2025, its lowest level in nearly eight years, thanks to a steep drop in food prices. The last time inflation was this low was back in June 2017, when it stood at 1.46%.

This marks the ninth straight month of easing inflation, as per the latest Consumer Price Index (CPI) data released by the Ministry of Statistics and Programme Implementation on Tuesday (August 12).

The fall was largely led by a deflation in food and beverage prices, which dropped by 0.8% in July—sharper than the 0.2% decline in June, and a dramatic turnaround from 5.1% inflation in July 2024.

Key food items such as vegetables, pulses, spices, and meat saw prices fall significantly. Vegetable prices dropped by 21%, while pulses fell 14%, driven by both a high base effect and softening prices in the market.

“Food inflation is expected to remain under control, thanks to healthy monsoon progress, strong sowing in the kharif season, and good reservoir levels,” mentioned Rajani Sinha, Chief Economist at CareEdge Ratings.

Even core inflation excluding food and fuel eased to 4.1% in July from 4.4% in June, inching closer to the Reserve Bank of India’s (RBI) target of 4%.

Inflation in pan, tobacco, and intoxicants remained unchanged at 2.4%, while the clothing and footwear segment saw a marginal dip to 2.5%. Housing inflation held steady at 3.2%, and prices in the fuel and light category edged up slightly to 2.7%, compared to 2.5% in June. Other categories within the Consumer Price Index (CPI) showed little movement in July. 

Dipanwita Mazumdar, Economist at Bank of Baroda, expects inflation to stay low through the rest of the year due to a statistical high base and easing global commodity prices. She stated. “While global attention is on tariff-related inflation, India is benefiting from favourable conditions. The weakness in global growth is helping keep commodity prices in check, which offsets some of the impact of higher tariffs.”

However, she cautioned that if India is forced to stop importing oil from Russia due to pressure from U.S. President Donald Trump, turning to countries like Kuwait and Iraq could help soften the impact.

With inflation staying well below the RBI’s comfort range of 2–6%, everyone will be watching closely to see how the central bank acts in its upcoming policy decisions.