India’s Retail Inflation Falls to 1.55%, Lowest Since 2017

India’s retail inflation fell to an over eight-year low of 1.55% in July, government data showed on Tuesday, thanks largely to easing food prices. This is the first time in more than six years that inflation has slipped below the Reserve Bank of India’s (RBI) comfort band of 2% to 6%, and the lowest year-on-year rate since June 2017.

Retail inflation in July was significantly lower than 3.16% in April and 3.54% in July last year. Economists had expected a modest drop to 1.76%, according to a Reuters poll.

Food prices, which make up nearly half of the consumer basket, fell 1.76% in July, a sharper decline than the 1.06% drop recorded in June. A strong spring harvest has helped India keep food inflation under control, despite uneven monsoon rains, continuing the country’s longest stretch of falling prices in over a decade.

The data comes shortly after the RBI’s Monetary Policy Committee (MPC) left interest rates unchanged at 5.50%, calling the inflation outlook “more benign.” The pause follows three rate cuts since February, totaling 100 basis points, with the central bank keeping its neutral stance.

Experts say the lower inflation gives the RBI more flexibility to support an economy that is facing pressures after U.S. President Donald Trump raised tariffs on Indian goods.

Fuel and electricity prices edged up slightly to 2.67% in July from 2.55% in June.

Vegetable prices fell sharply by 20.69% in July, compared with a 19% drop in June, while pulses prices dropped 13.76%, up from an 11.76% fall in the previous month. Inflation in rural areas stood at 1.18%, while urban areas saw a slightly higher rate of 2.05%.

The RBI has cautioned that food prices, particularly vegetables, remain volatile and may push inflation higher in the last quarter of FY26. While global tensions have eased, incoming tariffs and trade disruptions continue to pose risks.

For the full year FY26, the RBI now projects inflation at 3.1%, down from a 3.7% forecast in June. Looking ahead to FY27, the central bank expects CPI to rise to 4.9% in the first quarter, slightly above its 4% target, with quarterly estimates of 2.1% in Q2, 3.1% in Q3, and 4.4% in Q4. Core inflation has remained steady at 4%, the RBI noted, while risks to the outlook are “evenly balanced.”

Also Read: India's Wholesale Inflation Rises as Food and Fuel Costs Climb