“The higher retail inflation was due to high food, housing, utilities and gas sub-group, and transport, which cumulatively account for over 63 per cent of the CPI index,” Megha Arora, Director, India Ratings and Research said.
Overall 8 out of the 12 sub-groups recorded an increase in prices including clothing & footwear, furnishings and group, restaurant and accommodation and others, she noted.
Also read: RBI expects FY2027 growth at 6.7%, inflation at 5%
Fuel impact was evident on user groups – transport prices increased 4.43 per cent, while restaurant & accommodation services grew 7.72 per cent underlining the impact of ongoing West Asia conflict on commercial liquified petroleum gas, Arora said.
Food inflation grew 5.52 per cent in July 2026 despite improved rainfall. Items of mass consumption like ginger, garlic and onions recorded high double-digit growth. Food and beverages contributed 193 bp or 43 per cent to July’s CPI print, she added.
Stable core inflation (3.9 per cent since May 2026) suggests absence of demand push to inflation and in FY27 it may undershoot RBI’s forecast of 4.3 per cent, Arora said.
Also read: Renewed West Asia tensions, weather shocks pose risk to growth: RBI Governor
Ind-Ratings believes the headline inflation is likely to remain stable around 4.5 per cent in August 2026 but remain within RBI’s upper tolerance band of 6 per cent.
Persistent upside risks are posed by geopolitical tensions and El Nino weather pattern, though some improvement in the latter could be visible in the August print. Crude price volatility is expected to continue with oil likely to hover around USD80-85/bbl in the coming weeks, the agency said.
“After crossing the 4 per cent threshold in June, the Consumer Price Index (CPI)-based inflation rose at a slower pace to 4.45 per cent in July from 4.38 per cent in June. A favourable base effect, reflecting last year’s spike in vegetable and edible oil prices, capped the upside to food inflation,” Dipti Deshpande, Senior Director and Principal Economist Crisil Ltd, said.
However, the comfort may prove short-lived. Adverse base effects for food inflation, higher edible oil prices, the fading impact of GST rate cuts and a gradual pass-through of input costs, particularly transportation costs, is expected to push inflation higher in the coming months, she added.
Crisil expects CPI inflation to average 5.1 per cent in fiscal 2027, up from 2 per cent last fiscal.
Risks remain tilted to the upside, driven by higher fuel prices, currency depreciation, second-round effects and potentially weak rainfall, it said.