India retail inflation holds steady at 4.45% in July despite stress over rise in food, fuel prices

India's retail inflation held steady in July, registering 4.45%, a marginal increase from June's 4.38%. This stability largely vindicates the Reserve Bank of India's (RBI) Monetary Policy Committee's stance, which did not identify widespread inflationary pressures in its recent meeting. The figure also aligns with analyst expectations, as a Bloomberg poll predicted 4.5% inflation for July.

The Consumer Price Index (CPI) showed that rising food and fuel prices counterbalanced subdued core inflation. Core inflation, which excludes volatile food and fuel components, remained stable at 4% in July, consistent with June's figure. However, non-core inflation saw a significant rise, increasing from 1.9% in January to 5.1% in July. Food inflation alone climbed from 2.1% to 5.2% over the same period, with food items constituting 36% of the CPI basket.

The increase in fuel prices is partly attributed to the ongoing conflict in West Asia. Inflation for Liquefied Petroleum Gas (LPG) and Piped Natural Gas (PNG) rose from 1.7% in January to 5% in July. Similarly, inflation for fuels and lubricants used in personal transport, including petrol, diesel, and CNG, surged from 0.07% in January to 7.55% in July. Prices for these transport fuels remained relatively flat in 2025 and saw staggered increases starting and concluding in May 2026.

Looking ahead, the RBI forecasts annual CPI inflation to average 5% for the fiscal year 2026-27. Quarterly projections indicate inflation rates of 4.7% for the September 2026 quarter, 5.9% for the December 2026 quarter, and 5.5% for the March 2027 quarter. The inflation rate for the June 2026 quarter was recorded at 4.3%.