India’s CPI Retail Inflation Rises to 2.07% in August 2025

India’s CPI Retail Inflation Rises to 2.07% in August 2025

Why in News? 

According to the Ministry of Statistics and Programme Implementation data, India’s Consumer Price Index retail inflation rose to 2.07% in August 2025, showing a noticeable increase from last month.

Key Highlights: Ministry of Statistics and Programme Implementation Data in August 2025

• India’s retail inflation based on the Consumer Price Index (CPI) rose to 2.07 percent in August 2025 compared to the revised 1.61 percent in July 2025. This increase of 46 basis points shows a moderate upward movement in overall consumer prices across the country.
• The Consumer Food Price Index (CFPI) recorded a year-on-year food inflation of -0.69 percent in August 2025. While negative, it indicates an improvement from July 2025, when food inflation stood at -1.76 percent. 
• In rural areas, headline inflation rose from 1.18 percent in July 2025 to 1.69 percent in August 2025, showing a steady increase in general prices. Food inflation in these regions also improved, moving from -1.74 percent in July to -0.70 percent in August.
• The headline CPI inflation in cities increased from 2.10 percent in July 2025 to 2.47 percent in August 2025. Similarly, urban food inflation improved from -1.90 percent in July to -0.58 percent in August. The rise was driven mainly by price increases in vegetables, edible oils, meats, and personal care items.

Reasons for CPI Retail Inflation Rise in August 2025

• Price Surge in Vegetables: One of the leading causes was the sharp rise in vegetable prices. Data showed that tomato prices jumped by nearly 16.9 percent year-on-year, reversing the downward trend seen over the past several months. Vegetables such as onions and potatoes also registered higher costs due to supply disruptions in multiple producing states. 

• Higher Costs of Edible Oils: The oil and fats category added significant upward pressure on inflation during August 2025. Mustard oil and other edible oils recorded a sharp rise of more than 24 percent compared to 19 percent in July 2025, reflecting supply shortages and higher import costs. This sudden jump increased overall food inflation.

• Seasonal Demand on Meat: The animal protein segment also contributed to the inflationary trend. Meat and fish prices increased due to seasonal demand and transportation bottlenecks, while eggs showed visible price pressures linked to higher feed costs.

• Weather Disruptions: Flooding in agricultural regions such as Punjab, Rajasthan, and Telangana led to supply shortages in fresh produce, pulses, and certain cereals. Transportation delays worsened the availability of goods in markets, creating price spikes in specific categories.

What is CPI Retail Inflation?

• About: CPI retail inflation is the rate at which the overall prices of goods and services consumed by households increase over time. 
  • It is measured using the Consumer Price Index (CPI), which tracks how the cost of a fixed basket of goods and services changes compared to a base year. 
  • In India, the current Base Year used for CPI is 2012 = 100. The basket includes food, housing, clothing, fuel, transport, health, education, and many other essential items.
  • The food and beverages group has the highest share and covers cereals, pulses, vegetables, milk, oils, meat, and eggs. The housing group is included only for urban areas and covers rent and house maintenance. The fuel and light group captures electricity, kerosene, and LPG prices.
• Calculation: To calculate CPI retail inflation, the government compares the cost of a fixed set of goods and services in the current period with the same set in the base year. 
  • The National Statistical Office (NSO) collects price data from both rural and urban areas across India every month. Weights are assigned to different categories based on how much households usually spend on them.
  • CPI is calculated by comparing the cost of a fixed basket of goods and services in the current year with its cost in the base year, and then the ratio is multiplied by 100 to express inflation.
  • After calculation, CPI is published monthly by the NSO under the Ministry of Statistics and Program Implementation (MoSPI). 
• Features; CPI is considered the most important indicator of inflation because it directly reflects the cost of living for the common population. 
  • When the CPI rises, it shows that families have to spend more money on their everyday needs. 
  • CPI focuses on the retail level, this makes CPI retail inflation more relevant for policymakers, financial institutions, and ordinary citizens.
  • The Reserve Bank of India (RBI) uses CPI retail inflation as the key yardstick for framing its monetary policy. 
  • Since 2016, India has adopted an inflation-targeting framework under which the RBI aims to keep CPI inflation within a band of 2 to 6 percent, with 4 percent as the medium-term target.
  • CPI inflation helps in adjusting wages, pensions, subsidies, and contracts. It also provides clarity on the purchasing power of citizens.