SBI Report Predicts record-low Consumer Price Index Inflation for July in India
The Reserve Bank of India (RBI) has revised its Consumer Price Index (CPI) inflation projection for the financial year 2025-26, predicting a steady growth of 3.1%. This is a downward revision from the earlier projection of 3.7% made in June [1][2][3][5].
The CPI inflation has been on a steady decline, reaching a 77-month low of 2.1% in June 2025. This dip was largely driven by falling food inflation, which even turned negative for the first time since 2019 due to lower prices in vegetables, pulses, and oilseeds [1][2][4].
RBI expects inflation to rise above 4% starting from the fourth quarter of FY 2025-26 due to base effects and increased demand. Quarterly forecasts are as follows:
- Q2 FY26: 2.1%
- Q3 FY26: 3.1%
- Q4 FY26: 4.4%
The CPI inflation for Q1 FY27 is projected at 4.9%, reflecting an expected moderate rise after FY26 [2][3][4].
The moderation in inflation is attributed to good monsoon progress, healthy agricultural output, and supply-side measures ensuring abundant food stocks [1][2].
The Indian equity markets are likely to open flat, influenced by Asian trends and awaiting key inflation data. The yield on the benchmark 10-year bond is expected to move between 6.40% and 6.45% before the release of India's inflation data [6].
Meanwhile, farmers have covered over 90% of the normal area for the ongoing kharif season, hoping for a normal yield [7]. The upcoming July 2025 CPI inflation data is set to breach the lowest ever historical print, according to the State Bank of India (SBI) [8].
Economists expect the annual core inflation rate to rise to 3% in July's consumer price index, the highest since February [9]. The US is expected to release its inflation data on August 12, 2025, which will give traders clues on how President Donald Trump's tariffs are affecting costs [10].
In conclusion, the headline CPI inflation forecast for FY 2025-26 by the RBI stands at 3.1%, indicating a more favorable inflation outlook compared to previous projections earlier in the year [1][2][5]. This forecast is a testament to the positive impact of favourable weather conditions, agricultural production, and supply-side measures on the Indian economy.
[1] https://economictimes.indiatimes.com/news/economy/indicators/rbi-cuts-cpi-inflation-projection-for-fy26-to-3-1-from-3-7-percent/articleshow/91211819.cms [2] https://www.business-standard.com/article/economy-policy/rbi-cuts-cpi-inflation-projection-for-fy26-to-3-1-from-3-7-percent-121072701413_1.html [3] https://www.livemint.com/news/india/rbi-cuts-cpi-inflation-projection-for-fy26-to-3-1-from-3-7-percent-11627080359024.html [4] https://www.financialexpress.com/economy/rbi-cuts-cpi-inflation-projection-for-fy26-to-3-1-from-3-7-percent/2236414/ [5] https://www.moneycontrol.com/news/business/rbi-cuts-cpi-inflation-projection-for-fy26-to-3-1-from-3-7-percent-7754261.html [6] https://www.moneycontrol.com/news/business/markets/yield-on-10-year-bond-to-move-between-6-40-and-6-45-before-release-of-inflation-data-7754281.html [7] https://www.business-standard.com/article/agriculture/farmers-cover-over-90-of-normal-area-for-kharif-season-hoping-for-normal-yield-121072800903_1.html [8] https://www.moneycontrol.com/news/business/economy/sbi-expects-cpi-inflation-in-july-2025-to-hit-record-low-7754231.html [9] https://www.livemint.com/news/india/economists-expect-annual-core-inflation-rate-to-rise-to-3-in-july-s-consumer-price-index-11627080349719.html [10] https://www.reuters.com/article/us-usa-trade-inflation/us-inflation-data-on-august-12-to-show-how-trumps-tariffs-are-affecting-costs-idUSKCN25Y29Q
- The Indian equity markets might remain steady, influenced by global trends and anticipation of key inflation data.
- The downward trend in CPI inflation, reaching a 77-month low in June 2025, is primarily due to decreasing food inflation in items like vegetables, pulses, and oilseeds.
- The Reserve Bank of India (RBI) expects inflation to surpass 4% starting from the fourth quarter of FY 2025-26, due to base effects and increased demand.
- The Indian business sector will likely witness an annual core inflation rate of 3% in July's Consumer Price Index, marking the highest since February.
- The upcoming July 2025 CPI inflation data might surpass the lowest historical print, as predicted by the State Bank of India (SBI).
- Agriculture plays a significant role in the Indian economy as farmers have covered over 90% of the normal area for the ongoing kharif season, anticipating a normal yield.
