Improving macros, Pg8

Key Highlights:

• Retail inflation rose to 2.1% in August 2025, ending a nine-month decline, but remains within the RBI's comfort band of 2%-6%.
• Food inflation is subdued, with vegetable and pulse prices contracting by 15.9% and 14.5%, respectively.
• India's macroeconomic outlook has shifted from low growth, high inflation to high growth, low inflation.
• New GST rates, effective September 22, 2025, are expected to further lower prices.

Detailed Insights:

• The government is likely satisfied with the subdued food inflation, especially with the National Food Security Act ensuring affordable food supplies.
• Other necessities like clothing, footwear, housing, and fuel are experiencing low inflation, lower than the previous month.
• The difference between growth and inflation is now about 5.5 percentage points, a significant improvement from last year's 2.1 percentage points.
• Even if India stops purchasing Russian oil, the economic impact is expected to be limited due to relatively low global crude prices.
• Expectations are rising that the RBI's Monetary Policy Committee may cut interest rates, possibly in December 2025, depending on global uncertainties.

Key Concepts Involved:

• Retail Inflation: The change in price of a basket of goods and services that households typically purchase.
• Monetary Policy Committee (MPC): A committee of the RBI that sets India's benchmark interest rates.
• National Food Security Act (NFSA): An Indian act that aims to provide subsidized food grains to a large section of the population.