August CPI Review: Analysts See India Inflation Benign, Food Prices Remain Key Swing Factor

India’s inflation picture is turning nuanced, with food-led pressures emerging even as core inflation holds steady and most of the CPI basket runs below 4%. Global and domestic brokerages see the near-term outlook as “benign” but diverge on the policy path, weighing factors like GST cuts, monsoon effects, and imported inflation shocks.

Goldman Sachs

Goldman Sachs highlighted that the increase was mainly due to higher food prices, particularly vegetables and animal proteins. Core inflation, however, stayed unchanged at 4.1%, as higher gold prices offset declines in categories like clothing and education. Goldman’s preliminary estimate pegs September CPI at 2.0%, with sequential food price gains of 0.6% so far in the month.

CLSA

CLSA noted that over 70% of the CPI basket is now running below 4% inflation, a historic low. While imported inflation surged to a 31-month high of 7.6%, food inflation remained weak. CLSA expects vegetable deflation to continue until November, keeping headline inflation between 1–2% before rising toward 4% in early 2026. It sees the RBI holding rates in October but leaving room for a cut in December.

CITI

Citi described August inflation as “benign,” tracking closely with RBI forecasts. However, it flagged the recent GST cut as a key swing factor, potentially lowering fiscal year 2026 inflation averages to 2.9% from 3.2% earlier. Citi said the October policy meeting has turned “live” given the GST cut’s impact on inflation forecasts.

BofA Global Research

BofA observed that headline inflation had moved back into the RBI’s tolerance band after falling to an eight-year low in July. Food prices recovered marginally, while core inflation inched up to 4.2% on higher gold prices. BofA expects CPI to remain below 4% through 2025, tracking September inflation at 1.7%. It flagged risks from excess monsoon rains but believes the overall inflation outlook is contained.

PhillipCapital

PhillipCapital’s assessment pointed to subdued inflation, with sequential momentum slowing. It noted vegetable prices rising by 3%, while pulses and eggs corrected. Core inflation ticked up slightly to 4.3%. The firm expects GST cuts effective from late September to cushion inflation pressures in coming quarters, though food price spikes from recent floods remain a risk.

Nuvama

Nuvama echoed that inflation remains benign despite the uptick. It pointed out that super-core inflation (excluding precious metals) eased further to 3.1%. While CPI could edge higher as vegetable prices normalise, a good monsoon supports stability. Nuvama expects RBI to continue easing policy, but warned that growth outlook uncertainties remain.