New Delhi
Retail inflation (CPI) data has come for the month of July. India’s retail inflation has come down to 1.55% in July, the lowest level since June 2017. According to government data, this decline in inflation was seen in July due to softening of food prices and stability in fuel rates. This level is far below the Reserve Bank of India’s 4% inflation target.
Low inflation is expected to improve the purchasing power of consumers and will support economic activities, although experts say that such a low-level inflation can also create demand-side challenges.
RBI reduced inflation estimate
Earlier, in the meeting of the RBI Monkey Policy Committee held from August 4 to 6, inflation for FY 2025-26 has been reduced from 3.7% to 3.1%. RBI reduced its inflation estimate from 3.4% to 2.1% for the April-June quarter.
According to NSO data, food inflation based on the Consumer Food Price Index (CFPI) of the whole of India was -1.76% (provisional), compared to a year ago (July 2024) in July 2025, on an annual basis. In rural areas, this rate was -1.74% and -1.90% in urban areas. Food inflation declined by 75 basis points in July 2025. The food inflation rate of July 2025 is the lowest after January 2019.
Consumer Price Index (CPI) based inflation was 2.1 percent in June and 3.6 percent in July 2024. The inflation of July 2025 is the lowest since June 2017 when it was 1.46 percent.
The National Statistics Office (NSO) said, “The significant decline in headline inflation and food inflation during the month of July 2025 is mainly due to favorable base effects and pulses and products, transportation and communication, vegetables, grains and products, education, eggs and sugar and confectionery inflation.” The food inflation rate in July was 1.76 percent year-on-year (-).
Why is this decline important?
The frequent decrease in inflation means that the pressure on the budget of common people is decreasing.
The RBI (Reserve Bank of India) considers inflation as an important indicator while deciding its interest rate policy.
When inflation is very low, RBI has a chance to reduce the repo rate, which can affect the interest rates of the banks (fixed deposits) and the loan interest rates.
Will bank FD rates decrease?
If the inflation rate remains low in the coming months, then the RBI may reduce the repo rate in the next monetary policy review.
Banks get cheaper funds when the repo rate decreases, which makes them cheap loans.
But at the same time, FD rate may also decrease, because banks can raise money at low interest.
However, this is not immediately fixed, because RBI also takes into account not only inflation, but also economic growth, dollar-rupa rate and global interest rates.
