India Retail Inflation Falls to 1.55% Eight-Year Low in July

India's retail inflation rate dropped to an eight-year low of 1.55% in July 2025, driven primarily by declining food prices, marking the lowest consumer price index reading since June 2017. This easing of inflation, which fell below the Reserve Bank of India's (RBI) 2%-6% target band for the first time in over six years, provides the central bank room for potentially looser monetary policy to support the economy amid ongoing pressures from U.S. President Donald Trump's tariff increases on Indian goods. Food inflation, a major component of the CPI basket, contracted further to -1.76%, helped by a strong spring harvest despite uneven monsoons. Additionally, wholesale inflation also fell to nearly a two-year low at -0.45% in July, reflecting similar trends in food and fuel prices, though core wholesale inflation showed modest improvement. The RBI projects headline inflation at 3.1% for the fiscal year ending March 2026 but anticipates a rise in inflation during the first quarter of FY27 due to volatile food prices, especially vegetables. The inflation outlook remains balanced amid global trade uncertainties and geopolitical tensions, while India's economic growth exceeded expectations at 7.4% year-on-year in the quarter ended March 2025.