August CPI Preview: Retail Inflation Expected To Start Rising After Hitting Eight-Year Low

India's retail inflation is likely to see a reversal in trend after easing to the lowest in eight years, led by a slight uptick in food prices and core items.

The Consumer Price Index-based inflation is projected to ease to 2.11% in August, according to a median forecast of economists polled by Bloomberg. This is after it came in at 1.55% in July — the lowest in 75 months.

Despite the uptick, inflation will remain well below the central bank's target of 4%.

CPI - Food & Beverage inflation is likely to decline 0.11% year-on-year in August compared to 0.84% in July, according to estimates by Teresa John, economist at Nirmal Bang. While she estimates some uptick in vegetable prices on a sequential basis, led by prices of tomatoes, prices of other vegetables have remained largely contained despite heavy rainfall, she said. Prices of cereals inched up on a sequential basis, led by wheat, with edible oils too seeing some uptick in prices, according to high-frequency data from the Department of Consumer Affairs.

Core CPI—that excludes the volatile food and fuel—is likely to inch up too on account of gold.

The inflation outlook for 2025-26 has become more benign than expected earlier, the Monetary Policy Committee stated in its resolution. Large favourable base effects combined with steady progress of the southwest monsoon, healthy Kharif sowing, adequate reservoir levels and comfortable buffer stocks of food grains have contributed to this moderation. 

Over the coming months, the GST rate rationalisation is expected to lower inflation in the economy and also provide a boost to disposable income and savings for the common man. Economists believe India's retail inflation is likely to edge lower by one percentage point as a result of the GST rate cuts.