India’s retail inflation rate inches up to 2.07% in August; food prices in deflationary territory

India's retail inflation rate, as measured by the Consumer Price Index (CPI), rose to 2.07% for the month of August, compared with 1.61% in July, as per data released by the Ministry of Statistics and Programme Implementation (MoSPI). This rise in retail inflation by 46 basis points came on the back of higher prices of vegetables, meat and fish, edible oils, eggs, and personal care items.

The government stated that despite the marginal rise in headline inflation, prices of food continued to remain in deflationary territory. Food inflation, based on All India Consumer Food Price Index (CFPI), registered a year-on-year decline of 0.69% in August 2025. However, when seen month-over-month, food prices rose by 107 basis points. Breaking this further down, rural food inflation stood at -0.70%, while the corresponding figure for urban areas was marginally better at -0.58%.

The ministry noted that the moderation in food deflation was due to firmer vegetable prices and a rebound in protein-rich items such as eggs and meat.

The data also showed a divergence between rural and urban inflation. Retail inflation in rural areas rose to 1.69% in August from 1.18% in July, while urban inflation accelerated to 2.47% from 2.10% for the same period.

Among key categories, housing inflation eased slightly to 3.09% in August from 3.17% in July. Education inflation also moderated, falling to 3.60% from 4.11%, while health inflation softened to 4.40% from 4.57%. The inflation rate for the transport and communication segment stood at 1.94%, down from 2.12% in July, while fuel and light inflation cooled to 2.43% from 2.67% for the month of July.

As per the ministry, at 2.07%, retail inflation remains comfortably below the Reserve Bank of India’s (RBI) medium-term target of 4%, providing the central bank with ample policy space.

Hemant Jain, President, PHDCCI, in a press statement, said that year-on-year CPI inflation for August 2025 stood with RBI’s tolerance limit at 2.07%, despite international policy uncertainties.

He further noted that the year-on-year inflation rate, based on the All-India Consumer Food Price Index (CFPI), stood at –0.69% (provisional) in August 2025 compared with August 2024, supporting the prevailing low CPI inflation.

As per the statement, Jain further highlighted that the softening in the prices in August 2025 for cereals and products, pulses & products, as well as moderation in clothing and footwear, housing, and fuel and light, in comparison to July 2025, have collectively helped keep inflation within RBI tolerance level

"Looking ahead, we anticipate a further decline in CPI inflation, aided by the GST 2.0 reforms package. The proposed simplified two-tier structure will reduce production costs, translate into lower prices, and, in turn, stimulate consumption," he added.