Retail inflation inched up to 2.07% in August from 1.61 per cent in the preceding month, driven by a rise in prices of kitchen items, like vegetables, meat, fish, and eggs, according to government data released on Friday.

The rise in inflation comes after a continuous fall in the consumer price index (CPI) for nine months. It was in decline since November 2024. The inflation was 3.65% in August 2024.  The annual food inflation in August 2025 was (-) 0.69%, according to the data released by the National Statistics Office (NSO). "An increase in headline inflation and food inflation during the month of August 2025 is mainly attributed to an increase in inflation of vegetables, meat and fish, oil and fats, personal care and eggs," NSO said. The RBI has been mandated by the government to ensure inflation remains at 4% with a margin of 2% on either side.

The inflation in rural India increased to 1.69% in August from 1.18% in July. In urban parts of the country, it was 2.47% compared to 2.1% sequentially. Among states, the highest inflation was in Kerala at 9.04% and the lowest in Assam (-0.66%).

The RBI mainly factors in the retail inflation while arriving at its bi-monthly monetary policy. Commenting on the data, Icra Chief Economist Aditi Nayar said the sequential uptick in year-on-year CPI inflation in August 2025 was largely driven by the food and beverage segment, which was flat compared to the year-old levels, after witnessing a deflation in each of the last two months.