Inflation outlook: CPI might dip to record-low in July; FY26 average may slip below RBI forecast
Retail inflation in India is set to touch a record low in July 2025, with average inflation for the financial year 2025–26 likely to remain well below the
Reserve Bank of India
's (RBI) projection, according to a new report by the State Bank of India (SBI).
"We believe that the upcoming July 2025 CPI inflation data is set to breach the lowest ever historical print," the report stated.
SBI estimates average Consumer Price Index (CPI) inflation for FY26 to fall between 3.0% and 3.2%, significantly under the RBI's 3.7% forecast and far below the 4.6% average recorded in FY25.
This sharp moderation follows the RBI's recent 50 basis points rate cut during its June policy review.
With inflation expectations now appearing benign, the report noted that the central bank is shifting its focus to boosting capital formation to support more durable and sustained growth.
As highlighted by the monetary policy committee (MPC) in its latest resolution, monetary decisions will continue to be data-driven, aiming to strike a balance between inflation and growth.
For the future, SBI views the current inflation trend as firmly benign, even though risks from external trade disruptions and unpredictable price swings persist.
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The report also hinted at the possibility of another 25 basis points rate cut "sooner than later" to further fuel growth, stating, "The plot seems to be spiced with a further 25 bps rate cut (sooner than later) to give an adrenaline boost to the economic juggernaut as global developments necessitate us to build today for future".
India's CPI inflation dropped to a 77-month low of 2.10% in June 2025, down from 2.82% in May and 5.08% a year earlier.
The fall was mainly due to a sharp decline in food inflation, which also hit a 77-month low of -0.20%, driven by falling prices of vegetables, pulses, and spices.
However, the report flagged a growing concern over imported inflation, which rose for the 13th straight month in June. Surging gold and silver prices were key contributors. The share of imported inflation in the overall CPI basket rose sharply to 71% in June, from 50% in May.
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