Business EconomyPosted at: Sep 12 2025 10:29PM

Chennai, Sep 12 (UNI) Year-on-year inflation rate based on All India Consumer Price Index (CPI) for the month of August, 2025 over August, 2024 is 2.07% (Provisional), the Indian government said today.
According to the Ministry of Statistics & Programme Implementation, there has been an increase of 46 basis points in headline inflation of August, 2025 in comparison to July, 2025.
The Ministry also listed Kerala, Karnataka, Jammu and Kashmir, Punjab and Tamil Nadu as the states having high year-on-year inflation for the month of August 2025.
Reacting to the inflation figures, Madan Sabnavis, Chief Economist, Bank of Baroda said, the last month inflation figure has come in at 2.1% which is marginally higher than our forecast of 2%.
The trend in inflation continues to be driven by food inflation which was negative at 0.7%. Within food products the main drivers of low inflation are vegetables and pulses which recorded -15.9% and -14.5% respectively. Oils continue to exert upward pressure with 21.2% inflation due to higher global prices as well as low base effect, Sabnavis said.
Within the core inflation group, personal care, and health were the main drivers with the former at 16.6% and latter at 4.4%. Gold price was the main driver of the former along with higher prices of fast moving consumer goods (FMCG).
Sabnavis said the benefits of the reduction in the Goods and Services Tax (GST) on FMCG products as well as household goods (2.5%) will be felt partly in September and largely from October onwards.
He said, other services like education (3.6%), recreation (2.2%) and transport and communication (1.9%) registered modest inflation numbers which will also be the trend going forward. Inflation of clothing and footwear was 2.3% and is likely to go down again from October with the GST revisions.
“Putting all these numbers and GST effect together, it does look like that inflation will average around 3.1% for the year,” Sabnavis said.
According to him, the state wise inflation shows a continued trend with the southern states of Tamil Nadu, Karnataka and Kerala witnessing higher inflation with food inflation in particular being less benign as excess rains has affected prices of vegetables and fruits in particular. The same holds for Punjab at 3.5%.
Sabnavis said the inflation number is more on expected lines and is unlikely to alter the Reserve Bank of India (RBI) view on policy rates.
“Inflation was anyway to be benign going by RBI forecasts and the focus would be more on growth. Given the stable gross domestic product (GDP) path expected, we may expect status quo in rates and stance this policy,” Sabnavis said.
“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,” Madhavi Arora, Chief Economist, Emkay Global Financial Services said.
“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,” Arora added.
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