Retail inflation quickens to 2.1%, ending 9-month drop, Pg1

Key Highlights:

• Retail inflation rose to 2.1% in August 2025, ending a nine-month decline from 1.55% in July 2025.
• The Reserve Bank of India's (RBI) comfort band for retail inflation is 2%-6%.
• Food and beverages inflation remained nearly flat at 0.05% in August 2025.
• Vegetables and pulses recorded deflation at -15.9% and -14.5% respectively.

Detailed Insights:

• The rate of retail inflation had been decreasing consistently since November 2024 before the recent increase.
• Clothing and footwear inflation remained stable at 2.67% in August 2025, while the housing segment saw a slight increase to 3.06%.
• The fuel and light category experienced a notable rise in inflation, reaching 2.9% in August 2025.
• Oils continue to drive inflation upwards at 21.2% due to high global prices and a low base effect.
• Anticipated GST rate cuts may partially counteract the adverse base effect in 2026-27.
• There is potential for RBI rate cuts of 25-50 basis points from December if growth risks materialize.

Key Concepts Involved:

• Retail Inflation: The change in the price index of a basket of goods and services that households consume.
• Base Effect: The impact that the rise in price levels in the previous year has on the present year’s inflation.
• GST Rate Cut: A reduction in the Goods and Services Tax (GST) rates levied on various goods and services.