Retail Inflation Rises to 2.07% in August, Food Prices Inch Up

India’s retail inflation edged up to 2.07% in August 2025, after falling to an eight-year low of 1.61% in July, according to the latest Consumer Price Index (CPI) data released on Friday. The slight uptick was primarily driven by higher prices of vegetables, fruits, and cereals, which showed positive month-on-month inflation.

While overall food inflation remained in negative territory, it narrowed to -0.69% in August, up from -1.76% in July. The jump reflects a sequential rise in prices of key food items, though year-on-year inflation for vegetables, pulses, and spices continued to stay negative. Cereal inflation moderated slightly, while fruits and edible oils saw price increases.

Despite the uptick, headline inflation remained well below the 3.65% recorded in August 2024, offering some comfort amid global uncertainty around commodity prices.

The data also highlighted a growing divergence between rural and urban inflation. Rural CPI rose to 1.69% in August from 1.18% in July, while urban inflation climbed to 2.47% from 2.10%. Food inflation showed a similar trend, with rural food inflation at -0.70% and urban at -0.58%.

Among key expenditure categories, healthcare inflation stood out at 4.40%, followed by education (3.60%), housing (3.09%), fuel and light (2.43%), and transport and communication (1.94%).

At the state level, Kerala recorded the highest inflation among major states with a population above 50 lakh, at a steep 9.04%. Other states with relatively high inflation included Karnataka (3.81%), Jammu & Kashmir (3.75%), Punjab (3.51%), and Tamil Nadu (2.93%).

Core inflation — which excludes food and fuel — remained unchanged at 4.2% for the second consecutive month. However, there was a split between core goods and services. “Higher gold prices contributed to the rise in core goods inflation, especially in personal care and effects,” said Gaura Sen Gupta, Chief Economist at IDFC First Bank. “In contrast, services inflation eased to 3.4% from 3.6%, led by softer prices in education, healthcare, transport and communication.”

Retail inflation has stayed under 4% so far in FY26, in line with the Reserve Bank of India’s projection of 3.1% for the year. Analysts do not foresee significant near-term price risks, citing recent GST rate cuts and easing input costs.

“Given the softer food inflation and expected moderation in core inflation, we’ve revised our FY26 inflation forecast downward from 3.5% to 3.2%,” said Dharmakirti Joshi, Chief Economist at Crisil.