India’s consumer inflation continued to ease in July, dropping for a ninth straight month to 1.55%, below analysts’ estimates, government data showed Tuesday.
The headline inflation rate fell on the back of declining growth in food prices, to its lowest level since June 2017. Economists polled by Reuters had estimated July inflation at 1.76%.
Food inflation, which is a key component of the consumer price index, came in at -1.76%, lower than the -1.06% print in June.
The inflation reading comes after the Reserve Bank of India held rates at 5.5% in its policy meeting last week. The RBI said that the inflation outlook for the fiscal year ending March 2026 “has become more benign than expected,” adding that this was due to healthy sowing of autumn crops, as well as a comfortable buffer stocks of food grains.
The central bank forecast inflation at 3.1% for the fiscal year.
Tuesday’s CPI reading offer room for a looser monetary policy to shore up India’s economy as it grapples with trade tensions stirred by U.S. President Donald Trump’s aggressive tariff policy.
“Combined with the potential hit to GDP from the punitive US tariffs on India, July’s very soft inflation print has certainly increased the chances of further policy easing this year. That said, the 50% tariff rate may not prove permanent,” said Joe Maher, assistant economist at Capital Economics.
“The MPC also broadly shares our view that inflation will rebound in the coming months and its relatively hawkish communications following last week’s policy meeting suggest the barrier to further easing remains high,” he added.
India faces tariffs totaling 50% toward the end of this month. Besides “reciprocal” duties of 25% already in effect, the White House has levied another 25% in tariffs, set to come into force on Aug. 28, on India for buying oil from Russia.
The two countries had been locked in a war of words in the lead up to Trump’s Aug. 7 deadline, with the U.S. President accusing New Delhi of funding Russia’s war in Ukraine and India calling out both the U.S. and the European Union on their trade with Russia.
India’s economic growth came in better than expected for the quarter ended March, expanding 7.4% year on year and sharply higher than the 6.7% growth forecast by economists in a Reuters poll. The RBI forecasts GDP growth of 6.5% for the year ending March 2026.
Source: CNBC