Introduction to India’s Retail Inflation
India’s retail inflation is expected to reach a record low in July 2025, according to a report by the State Bank of India (SBI). The average inflation for the financial year 2025-26 is projected to be significantly lower than the Reserve Bank of India’s (RBI) estimate.
Projected Inflation Rates
SBI projects that the average CPI inflation for FY26 will be between 3.0-3.2 per cent, which is significantly lower than the RBI’s estimate of 3.7 per cent and well below the average of 4.6 per cent recorded in FY25. This sharp moderation in inflation comes on the back of a recent 50 basis points rate cut by the RBI in its June policy.
Factors Contributing to Low Inflation
The report noted that with benign inflation expectations in place, the central bank is now focusing on supporting capital formation to ensure more durable and sustained growth. The decline in inflation was largely driven by a sharp fall in food inflation, which also hit a 77-month low of -0.20 per cent. The fall in prices of key food items such as vegetables, pulses, and spices contributed significantly to this decline.
External Risks and Future Projections
Looking ahead, SBI sees the current inflation trend as firmly benign, even as external trade-related disruptions and unpredictable price movements continue to pose risks. However, the report flagged concerns around imported inflation, which continued to rise for the 13th consecutive month in June 2025. Higher gold and silver prices were the main contributors to this increase.
Rate Cut Possibilities
The report hinted at the possibility of another 25 basis points rate cut "sooner than later" to further support economic growth as global uncertainties make it necessary to build for the future. It stated "the plot seems to be spiced with a further 25 bps rate cut (sooner than later) to give an adrenaline boost to the economic juggernaut as global developments necessitate us to build today for future".
Recent Inflation Trends
India’s CPI inflation in June 2025 fell to 77-month low at 2.10 per cent, down from 2.82 per cent in May 2025 and 5.08 per cent in June 2024. The share of imported inflation in the overall CPI build-up rose to 71 per cent in June 2025, up from 50 per cent in May.
Conclusion
In conclusion, India’s retail inflation is expected to reach a record low in July 2025, driven by a sharp fall in food inflation and a recent rate cut by the RBI. While external risks and imported inflation continue to pose concerns, the report suggests that the current inflation trend is firmly benign and that another rate cut may be on the horizon to support economic growth.
