India’s fight against inflation just notched a major victory. According to government data released Tuesday, the country’s annual retail inflation rate dropped to 1.55% in July 2025. That’s not only down sharply from June’s 2.10% reading, but it also marks the lowest level since June 2017—a span of more than eight years.
What’s more, this is the first time since 2019 that India’s headline inflation has slipped below the Reserve Bank of India’s comfort zone of 2% to 6%. The number came as a surprise to many economists: a Reuters poll had expected July inflation to come in at 1.76%, but the actual print undershot even those modest projections.
Food Prices Lead the Cool-Down
So what’s behind this remarkable slowdown? The biggest driver was food prices, which account for nearly half of the Consumer Price Index (CPI) basket. In July, food inflation—measured by the Consumer Food Price Index (CFPI)—fell further into negative territory, hitting -1.76%. That’s a steeper drop than June’s -1.01% and represents the lowest level since January 2019.
Analysts say that despite some worries about uneven monsoons earlier in the year, a strong spring harvest helped stabilize supplies and keep food prices in check. This has extended India’s longest disinflationary streak in over a decade.
Rural vs Urban: Both See Relief
The cooling trend wasn’t confined to one part of the country. Rural inflation eased to just 1.18% in July from 1.72% in June, while rural food inflation fell deeper into negative territory at -1.74%. In cities, urban inflation also dropped—from 2.56% last month down to just 2.05%.
For context, overall CPI inflation was as high as 3.54% just a year ago in July 2024 and stood at 3.16% as recently as April this year.
With inflation now sitting comfortably below the RBI’s target range, analysts are watching closely to see if the central bank might pivot its policy stance—or if this disinflationary trend will last through the rest of the year.
