India’s inflation rate based on the Consumer Price Index (CPI) edged up to 2.07 per cent in August, although prices food continued to decline during the month, easing the burden on the common man, according to figures released by the Ministry of Statistics on Friday. 

The headline inflation in August was marginally higher than the 1.61 per cent in July this year, which was the lowest level of year-on-year retail inflation since June, 2017. However, the inflation rate is well within the RBI’s target rate of 4 per cent, which allows the central bank to continue with the soft money policy to spur growth.

Food inflation was estimated at -0.69 per cent in August, remaining in the negative zone for the third consecutive month, as the prices of vegetables declined by 15.92 per cent and pulses turned cheaper by as much as 14.53 per cent. The prices of spices also fell by 3.24 per cent during the month.

An increase in headline inflation and food inflation during August compared to July, is mainly attributed to increase in inflation of, meat and fish, edible oil and fats, eggs and personal care and affects. However, the fuel inflation rate in August was at 2.43 per cent compared to 2.67 per cent in July while the housing inflation rate for the month was 3.09 per cent compared to the corresponding figure of 3.17 per cent in July.

Similarly, the health inflation rate was also lower at 4.40 per cent in August compared to 4.57 per cent in July. Meanwhile, the Reserve Bank of India (RBI) has pegged India’s CPI inflation at 3.1 per cent for 2025-26 as the steady progress of the monsoon and robust kharif sowing are expected to keep food prices in check.

RBI Governor Sanjay Malhotra recently said, “The inflation outlook for 2025-26 has become more benign than expected in June. Large favourable base effects combined with steady progress of the southwest monsoon, healthy kharif sowing, adequate reservoir levels and comfortable buffer stocks of foodgrains have contributed to this moderation.”

CPI inflation, however, is likely to edge up above 4 per cent by Q4:2025-26 and beyond, as unfavourable base effects, and demand side factors from policy actions come into play. Barring any major negative shock to input prices, core inflation is likely to remain moderately above 4 per cent during the year, he explained.