India CPI Rises To 2.07% In August 2025: Gold Prices Record Rally Hits Core Inflation

India CPI Inflation Data: India's consumer price index (CPI) inflation, also known as retail inflation, increased in August 2025 to 2.07% against 1.61% in July 2025, according to the Ministry of Statistics & Programme Implementation (MoSPI) data released Friday evening. The surge in retail inflation was driven by higher vegetable, meat and fish, prices.

Food inflation moderated during the month, but record gold prices rally in August impacted the core inflation. Food inflation continued to remain in the negative territory, but showed some improvement.

Retail Inflation In Rural, Urban Areas

The overall inflation surged in the rural areas to 1.69% in August from 1.18% reported last month. Additionally, food inflation also improved to -0.7% to 1.74%.
Retail inflation in urban areas also increased significantly to 2.47% from 2.10%. The surge in inflation was supported by increasing prices of food. However, education and health inflation eased.

The housing sector experienced a slight decrease in its year-on-year inflation rate from July's 3.17% to 3.09% in August 2025. Education costs saw a reduction as well, with inflation dropping from 4.11% in July to 3.60% in August.

Health-related expenses had an inflation rate of 4.40%, down from July's figure of 4.57%. Transport and communication costs also decreased slightly from a rate of 2.12% in July to 1.94% in August.

The fuel and light category recorded an inflation rate of 2.43% for August, down from July's rate of 2.67%. This combined figure includes both rural and urban sectors.

"A good monsoon progress, adequate reservoir levels, and strong kharif sowing bode well for food price stability. That said, risks remain from the late withdrawal of the monsoon and heavy rains in certain regions, which could risk crop damage. Additionally, persistently high double-digit inflation in edible oils warrants close monitoring, given weak sowing trends, import dependence, and elevated global edible oil prices. On the external front, while global commodity prices are broadly expected to remain stable, intermittent spikes cannot be ruled out amid ongoing geopolitical tensions. Concerns over potential additional sanctions on Russian crude could disrupt supply chains for major importers such as India and China. Although OPEC has spare capacity, global oil dynamics could shift and will need close monitoring," noted Rajani Sinha, Chief Economist, CareEdge Ratings

Gold Price Rally Hits Core Inflation

Core inflation, the consumer prices excluding food and beverages, fuel and light, and petrol and diesel for vehicles, stood at 4.3% in August, slightly higher than 4.2% in July.
While, the core inflation continued to be in the narrow range, it was impacted by surge in prices of items like gold. Inflation in gold increased by 40.27% in August, against 36.04% in July.

"India's headline CPI rose in August from 8-year lows seen in July. Core inflation was impacted by rising price of Gold. We expect RBI to cut rates in October. Benign inflation coupled with rate cuts by the FED will influence the committee," noted Jyoti Prakash, Managing Partner, Equity and PMS, AlphaaMoney.

Low Inflation To Ensure FY26 Targets Remain Below RBI Estimates

While there was some increase in India's retail inflation in August, the overall inflatio remained under control. The continued inflation undershoot in financial year 2025-26, would ensure that the numbers are likely to remain below RBI estimates, according to Madhavi Arora, Chief Economist, Emkay Global Financial Services.

"Continued spate of inflation undershoot vs RBI's estimates would ensure FY26 inflation will likely undershoot RBI's estimates by at least 50bps. Besides, the disinflationary bias may be increased further amid domestic GST rate cuts ahead," noted Arora underlining downside risks to growth in coming months.

"We assert the RBI's focus on 1-year ahead expected inflation appears increasingly misplaced in an evolving world - particularly as the global landscape continues to shift toward a disinflationary bias in Asia. Ahead, we think downside risks to growth would be increasingly evident with global resets and monetary easing led by Fed, and could open up space for easing in the rest of the year, even though the MPC seems to have raised the bar for further easing" Arora added.

GST Rate Cuts To Impact Inflation Positively

The GST rate cut and next-gen GST reforms are likely to positively impact the overall inflationary environment in the coming months, believes Sinha.

"Looking ahead, the recent rationalisation of GST rates is expected to have a positive impact on the overall inflationary environment. We estimate that it could lower CPI inflation by 70-90 bps annually under the current basket, assuming effective pass-through to consumers. With food inflation subdued and demand-side pressures contained, we now lower our inflation projection for FY26 to 2.7% from 3.1% earlier. Additionally, the forthcoming introduction of the new CPI series with a 2024 base year will be an important development to watch, as it may influence the estimated impact of the GST changes," Sinha added.