Consumer price inflation could potentially drop below 3.0% by December 2025, according to Acuité Ratings' predictions.
India's headline Consumer Price Inflation (CPI) has shown a significant decline, falling to 1.55% in July 2025, the lowest since June 2017[1][3][4]. This follows a 0.9% increase from June to July 2025, indicating a downward trend in inflation rates[2][5].
The Reserve Bank of India (RBI) has projected India's CPI inflation to remain below 3.0% until December 2025, primarily due to favourable base effects and a decline in food prices[1][3][4]. The Consumer Food Price Index (CFPI) showed a deflationary reading of -1.76% in July 2025, with steep price corrections in high-weight items such as vegetables, pulses, and spices contributing to the decline[3][4].
Favourable base effects are significant, as comparisons are made to periods of relatively higher inflation last year, thereby reducing the year-on-year inflation rate[3][4]. Additionally, reduced inflation has been observed in categories such as transport and communication, education, eggs, and others[3][4].
However, the RBI expects CPI inflation to rise above 4.0% by Q4:2025-26 and beyond, due to unfavourable base effects and demand-side factors from policy actions[3][4]. Econometric models predict inflation will hover around or slightly below 3.0% through the end of 2025, with a projection of a moderate increase beyond that into 2026 and 2027 (around 3.8-4.0%) as per longer-term forecasts[1][5].
Sankar Chakraborti, Managing Director and CEO of Acuité Ratings and Research Limited, stated that India's FY26 inflation target has been lowered to 3.0% from 3.5%, on the assumption of normal monsoons[6]. He also forecast a moderate increase in core inflation to 4.0-4.6% for FY26[6].
Coconut oil, gold, and silver recorded steep price increases of +131.8%, +36%, and +21.9% respectively, due to global commodity market pressures and financial trends[3][4]. Despite these increases, the overall impact on the CPI has been minimal, as these items have a lower weight in the CPI basket.
In summary, India is experiencing a period of unusually low CPI inflation through 2025, primarily due to falling food prices and favourable statistical base effects, which are expected to keep inflation subdued until at least year-end 2025[1][3][4]. However, a moderate increase is expected in the coming years.
[1] The Economic Times, "RBI lowers inflation projection for FY26 to 3%", 2025. [2] Livemint, "India's retail inflation slows to 1.55% in July", 2025. [3] Business Standard, "RBI lowers retail inflation forecast for FY26 to 3%", 2025. [4] Financial Express, "RBI lowers retail inflation forecast for FY26 to 3%", 2025. [5] BloombergQuint, "India's CPI Inflation Projections for FY26", 2025. [6] Moneycontrol, "India's FY26 inflation target lowered to 3%: Sankar Chakraborti", 2025.
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