Food Inflation Negative for Third Month, But Vegetable and Oil Prices Push Overall CPI Higher

Moneylife Digital Team 12 September 2025

Economy & Nation

India’s retail inflation, measured by the consumer price index (CPI), rose to 2.07% in August 2025 from 1.61% in July, according to data released by the Union ministry of statistics and programme implementation (MoSPI). The increase was driven by higher prices of vegetables, meat and fish, and edible oils, even as overall food inflation stayed in negative territory for the third straight month.

Inflation based on the consumer food price index (CFPI) stood at (-)0.69% in August, compared to (-)1.76% in July. Food inflation in rural areas eased to (-)0.70% from (-)1.74%, while in urban areas it was (-)0.58% against (-)1.90% in July.

At the state level, Kerala reported the highest retail inflation at 9.04%, while Assam registered the lowest at (-)0.66%.

Housing inflation moderated to 3.09% from 3.17% in July. Education and health inflation also cooled, to 3.60% and 4.40% respectively, while transport and communication inflation fell to 1.94%. Fuel and light inflation eased slightly to 2.43%, the Ministry data shows.

However, some categories saw sharper price increases. Vegetable inflation rose, pushing overall food prices higher. Edible oils continued to climb, with mustard oil up 24.2%, refined oil 23.5%, and coconut oil surging over 133% year-on-year. Gold and silver prices also drove inflation in miscellaneous goods, with increases of 40.3% and 31.8% respectively.

Despite the uptick, inflation remained below 3% for the fourth consecutive month and well under the Reserve Bank of India (RBI)’s medium-term target of 4%. August marked the seventh straight month that headline inflation stayed below the RBI’s threshold, helped by deflation in cereals, pulses, and vegetables.

The latest inflation figures are unlikely to alter RBI’s monetary policy stance.

RBI’s monetary policy committee, which has already cut policy rates by 100bps (basis points) this year to 5.5%, is scheduled to meet from 29th September to 1 October 2025.

While price pressures remain contained, RBI has cautioned that inflation could accelerate in late FY25-26 due to volatility in vegetable and food prices. Its latest projection pegs CPI inflation at 3.1% for FY25-26, but warns of a rise to 4.9% in the first quarter of FY26-27.

According to Aditi Nayar, chief economist of rating agency ICRA Ltd, with the goods and services tax (GST) rate cuts being implemented on 22 September 2025, the impact of the same on the CPI inflation is unlikely to be material in the ongoing month, given that the average monthly prices are used for the computation of the price indices. Overall, ICRA expects the headline CPI inflation to print at about 2.0% in September 2025, she says.

"The dip in average monthly prices owing to the GST cut will start to be visible in the October 2025 data, which along with a high base (+6.2% in October 2024), is likely to soften the inflation print for the month to around 1.5%. In ICRA's view, the GST rejig could dampen the headline CPI prints by 25bps-50bps during the third quarter (Q3) of FY25-26 to Q2 FY26-27 relative to our pre-GST rationalisation estimates, taking the average for FY25-26 to about 2.6%," Ms Nayar added.

For now, August data underscores a mixed picture: food prices are still dragging inflation down overall, but pockets of price spikes in oils, metals, and certain services suggest underlying pressures may build in the coming months.

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