India's August 2025 CPI report signals a shift in the inflation trend. Headline inflation climbed to 2.07%, marking an uptick after several months of steady moderation, though it remains well below the elevated levels seen in 2024.
Food inflation, tracked by the Consumer Food Price Index (CFPI), also showed improvement. Deflation in food prices eased to -0.69%, reversing from deeper negative readings earlier this year. This points to an ongoing recovery in key food categories.
What’s Driving the Shift?
- Rural prices are beginning to firm up after a prolonged soft phase.
- Urban prices are stabilizing as supply chain pressures ease.
- Together, these trends reflect normalization in supply conditions and a gradual recovery in rural demand.
Investor & Policy Takeaways
- Runaway inflation risks remain low, giving policymakers room to maintain a supportive stance.
- However, the uptick in headline CPI warrants caution around food supply and weather-linked risks.
- Rate-sensitive sectors such as banking, housing, and autos may continue to benefit in a low-inflation environment.
- A gradual return of pricing power in staples and consumer goods is likely, potentially supporting corporate earnings.
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