The headline inflation is below the Reserve Bank of India’s (RBI) comfort band of two per cent to six per cent
India’s consumer price index (CPI)-based retail inflation fell to an eight-year low of 1.55 per cent in July, driven by a sharp decline in the prices of vegetables and pulses. A year ago, in July 2024, it was at 3.60 per cent. The Consumer Food Price Index registered a negative growth of 1.76 per cent, reflecting lower prices compared to the year-ago figure.
The headline inflation is below the Reserve Bank of India’s (RBI) comfort band of two per cent to six per cent. On the surface, this inflation data could prompt the RBI to intervene and boost consumer spending by slashing interest rates. However, core inflation, which excludes volatile items like food and fuel, rose to 4.1 per cent in July 2025, as against 3.36 per cent in July 2024, allowing the RBI to avoid aggressive policy easing to counter deflationary expectations. Core inflation is considered a more stable indicator of the economic trajectory.
Despite overall stability in core inflation, category-wise data reveals weak demand in several sectors. Inflation in clothing, footwear, household services, transport and communication, and recreation and amusement still remains under three per cent, signalling subdued consumption. A subdued consumption hints at a challenging demand scenario in the country, which needs to be corrected.
As the nation requires a stable inflationary outlook — neither high inflation nor negative inflation — the government should focus its urgent attention on revving up demand through financial measures.
For several years, the government has been driving economic growth through massive investments. It is high time that Indian private industry resumes its lead in creating a virtuous cycle of investment, jobs, and growth. It cannot remain an idle beneficiary of the government’s investments without passing on the benefits to the key stakeholders in the system — the people.
