NEW DELHI: The July retail inflation number is likely to fall below 2% — the first time since January 2019. Analysts expect the figure to be in the range of 1.2-1.4%, aided by a favourable base effect and softer food prices. Retail inflation in June eased to 2.1% from 2.82% in May. In January 2019, the retail inflation hit the low of 1.97%.
“We expect July CPI inflation to ease further to 1.35%, led by a favourable base effect and overall softer food prices, even as vegetable prices are likely to see a seasonal, sharp sequential rise,” said Madhavi Arora, Chief Economist at Emkay Global.
ICRA’s Aditi Iyer has pegged July retail inflation at 1.4%, while Yuvika Oberoi of QuantEco Research estimates it at 1.19%. Economists at DBS Bank expect it to be around 1.3%.
“July inflation is likely to decelerate sharply to a new low for the series at 1.3% y-o-y from 2.1% y-o-y the month before,” said Radhika Rao, Executive Director and Senior Economist at DBS Bank. She noted that much of the moderation in price pressures is food-led, followed by ex-gold services.
“Base effects have also played a dominant role, reflected in the second month of contraction in the food and beverages segment, even as sequential momentum rises due to seasonal, monsoon-related supply vagaries,” Rao added.
Core inflation, however, is expected to remain above 4%, lifted by precious metals.
Analysts caution that as base effects fade in the coming months, headline inflation is expected to return above 4% by early 2026.
In its latest monetary policy statement in August, the Reserve Bank of India lowered its FY26 inflation estimate to 3.1% from 3.7% earlier. However, it also said CPI inflation is likely to edge up above 4% by the fourth quarter of FY26 and beyond, as unfavourable base effects and demand-side pressures from policy actions come into play.
The RBI’s monetary policy committee decided to maintain the status quo on rates, after front-loading a 100-bps cut in the first half of the calendar year.
Source: The New Indian Express
