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India's inflation rate quickens for the first time in 10 months in August 2025
India’s retail inflation rose 2.07% year-on-year in August 2025, as against 1.61% in July. RBI aims to keep CPI within 2%-6%.
India’s inflation rate rose for the first time in 10 months in August 2025, but is still low enough for the central bank to consider a repo rate cut if economic growth takes a hit due to US tariffs.
The consumer price index rose 2.07% year-on-year last month, as against a 1.61% for July, according to data released by the ministry of statistics and program implementation on Friday. That compares with the 2.11% forecast by economists in a Bloomberg survey. The Reserve Bank of India aims to keep inflation within 2% and 6%.
A benign inflation, and an economy that’s yet to show effects of US tariffs, may prompt the RBI to opt for a rate cut when India’s monetary policy committee meets on 1 October. While India’s GDP expanded 7.8% in April-June—the quickest pace in over a year—analysts from Citigroup Inc. expect the tariffs to shave 60-80 basis points off annual growth.
The RBI kept the repurchase rate unchanged in August.
Space for more rate cuts will open up from RBI’s December policy meeting, “if downside risks to growth materialise and the US Federal Reserve moves ahead with aggressive rate cuts,” Upasna Bhardwaj, an economist with Kotak Mahindra Bank, told Bloomberg. She expects the RBI to pause in the next policy meeting.
To be sure, the slight uptick in India’s inflation rate is inline with the central bank’s estimate. The RBI had warned that inflation may inch up in the coming months and stay above 4% level during January-March 2024.
Teresa John, an economist with Nirmal Bang Equities Pvt Ltd., said that there is scope for interest rates to fall as much as 50 basis points this year. The GST rate cuts announced by the government will also ease inflation pressures going ahead, she said.
One basis point is one-hundredth of a percentage point.
With inputs from Bloomberg.
