India's retail inflation rate reached 2.07% in August 2025, an increase from 1.55% in July. This rise was primarily due to an acceleration in food prices and a decline in the base effect. Inflation had been consistently decreasing for the past nine months, remaining well below the RBI's target of 2-6%.
India’s Retail Inflation: According to data from the Ministry of Statistics and Programme Implementation (MoSPI), India's retail inflation rate stood at 2.07% in August 2025, an increase from 1.55% in July. This rise in inflation is mainly attributed to the acceleration in food prices and a fading base effect. Until July, inflation had been on a continuous downward trend for nine months, showing a level significantly below the RBI's 2-6% target, while August recorded a slight uptick.
Reasons for the Increase in Inflation
According to experts, there are two primary reasons for the rise in retail inflation in August. Firstly, the acceleration in food prices. Typically, an increase in food prices has a direct impact on inflation. The second reason is the decline in the base effect. When comparing year-on-year data, if prices were lower in the previous year, even a marginal increase this year can make the inflation rate appear higher.
Experts stated that this increase in retail inflation in August was primarily driven by the rise in food prices. Additionally, minor increases in other essential commodities and transportation costs also put pressure on inflation.
Contribution of Government Policies
The Reserve Bank of India aims to keep inflation within the range of 2 to 6 percent. So far this year, the RBI has cut interest rates by a total of 100 basis points. However, the bank did not make any changes to interest rates in its recent meeting. Prior to this, the inflation rate in October 2024 was 6.21%. Following that, a consistent decrease in inflation was observed every month.
In June 2025, the inflation rate was recorded at 2.82%. In July, it was registered at 2.1%, and in August, it stood at 2.07%. Compared to the previous year, there has been a marginal increase in inflation in August this year. According to a Reuters survey, a slight increase in inflation in August was already anticipated.
Special Focus on Food Items
The biggest reason for the increase in inflation in August was food items. Rising prices of daily necessities like vegetables, pulses, and milk impacted the common person's pocket. Additionally, prices of oil, sugar, and grains also saw an increase.
Experts believe that in the coming months, if there are no significant changes in weather patterns or production, food inflation may remain stable. However, if there is a shortage in the supply of grains and vegetables due to any reason, inflation could rise further.
Gradual Decline in Inflation Rate Continues
Reports from the last nine months indicate an overall decline in India's inflation rate. The rates recorded were 2.82% in June 2025, 2.1% in July, and 2.07% in August. These rates have remained within the RBI's target range.
Experts suggest that controlling inflation in the coming months is possible, depending on government policies, stability in agricultural production, and global economic conditions. If prices of food and essential commodities remain stable, retail inflation can be kept in check.
A slight increase in the inflation rate directly impacts consumers' purchasing power. However, the rate of 2.07% is not considered very high and falls within the RBI's target range. Despite this, experts have advised the common person to pay attention to their expenses and savings.
