Kerala topped the chart to have the highest combined retail inflation at 8.89% in the country

FPJ News Service New Delhi

Headline inflation based on All India Consumer Price Index declined to an eight-year low of 1.55% in July 2025, marking the lowest y/y inflation rate after June 2017, according to official statistics released by the Ministry of Statistics & Programme Implementation on Tuesday. The y/y inflation rate based on All India Consumer Price Index (CPI) indicated a decline of 55 bps as compared to June this year.

The food inflation rate (y/y) for the month of July stood at -1.76%. Corresponding inflation rates for rural and urban areas were -1.74% and -1.90%, respectively. A decline of 75 bps was observed in food inflation in July in comparison to June. The food inflation in July, 2025 is the lowest after January, 2019. 

The decline in headline inflation and food inflation during the month of July, 2025 is mainly attributed to favorable base effect, and decline in inflation of pulses and products, transport and communication, vegetables, cereal and products, education, egg and sugar and confectionery.

Rural sector indicated significant decline in headline and food inflation in July. The headline inflation stood at 1.18 while the same was 1.72% in June. The CFPI based food inflation in the rural sector was -1.74% as compared to -0.87% in June.

Urban inflation recorded a decline from 2.56% in June, to 2.05% in July. A decline has also been observed in food inflation from -1.17% in June to -1.90% in July. During the month under review, housing inflation rate (y/y) stood at 3.17%. Corresponding inflation rate for the month of June was 3.18%. The housing index is compiled for the urban sector only.

For both rural and urban sector, education inflation (for both rural and urban sector) y/y rate for the month of July stood at 4.00%. Corresponding inflation rate for the month of June was 4.37%. Health inflation stood at 4.57% as against 4.38% in June. Transport and communication y/y stood at 2.12% (3.90% in June). Fuel and light inflation stood at 2.67% as against 2.55% in June.

Aditi Nayar, Chief Economist at Icra said the retail inflation was dampened by the continued y/y decline in food prices on an elevated base, even as vegetable prices displayed a surprising uptick. The expected uptrend in the forward-looking inflation trajectory, particularly the 4%-plus prints for Q4 FY2026 and Q1 FY2027, would limit the space for rate cuts in the upcoming policy meetings.