ndia’s retail inflation rose modestly in August 2025, but economists believe the increase is temporary and expect price pressures to ease, thanks in part to new GST reforms. According to an ANI-report, inflation based on the Consumer Price Index (CPI) jumped to 2.07% year-on-year in August from 1.61% in July.
What Analysts Are Saying
- Experts say the rise is largely driven by base effects price rises last year were high, so when compared against them, current inflation looks steeper and by seasonal food inflation.
- However, many believe this uptick won’t derail the broader disinflation trend, especially because of recent Goods & Services Tax (GST) reforms. Reduction in GST for many essential items is expected to bring inflation down in coming months.
Forecasts & Projections
- According to S&P Global Intelligence, after reviewing August data, revised inflation forecasts for FY26 have been lowered. The forecast now sits closer to 3.3% rather than earlier higher estimates.
- Economists expect that by October onwards, the full impact of GST rate rationalization will be visible. Combined with soft food inflation and moderate core inflation, headline inflation might stay within or slightly below the RBI’s target midpoint (around 4%).
Implications for Policy
- The Reserve Bank of India is likely to continue holding its policy rates steady for now, given the inflation remains well within its tolerance band of 2–6%.
- If growth weakens or inflation drops more sharply, there is scope for rate cuts later in the year. Analysts see room for 25-50 basis points reduction, depending on how fast GST benefits pass through to consumers.
