India inflation stays near 4.5% in July — food and fuel remain key drivers

India’s retail inflation remained broadly stable in July, with the Consumer Price Index (CPI)-based inflation rate rising marginally to 4.45 per cent from 4.38 per cent in June. The latest reading was in line with market expectations, with a Bloomberg poll of economists projecting inflation at 4.5 per cent.

The July data also lends support to the Reserve Bank of India’s Monetary Policy Committee (MPC), which had indicated at its meeting last week that there was no broad-based inflationary pressure in the economy.

Food and fuel remain key drivers

While headline inflation has stayed relatively contained, the recent upward movement has been led largely by food and fuel prices.

According to Centre for Monitoring Indian Economy (CMIE) data, core inflation — which excludes food and fuel — stood at 4 per cent in July, unchanged from June. It was 3.3 per cent in January, the earliest month available under the new CPI series with 2024 as the base year.

Non-core inflation, however, climbed from 1.9 per cent in January to 5.1 per cent in July. Food inflation also rose sharply during the period, moving from 2.1 per cent to 5.2 per cent. Food has a 36 per cent weight in the new CPI basket.

Overall inflation had touched almost zero in October 2025, at 0.04 per cent, before increasing every month through July.

West Asia conflict pushes up fuel inflation

Fuel prices have also contributed to the recent rise. Inflation in LPG and PNG, which together account for 1.98 per cent of the CPI basket, increased from 1.7 per cent in January to 5 per cent in July.

Inflation in fuels and lubricants used for personal transport, covering petrol, diesel and CNG, rose from 0.07 per cent in January to 7.55 per cent in July. The June and July readings were almost unchanged, with prices having undergone hikes in May 2026.

RBI expects inflation to rise ahead

The MPC expects CPI inflation to average 5 per cent in 2026-27. Its forecast puts inflation at 4.7 per cent in the September quarter, 5.9 per cent in the December quarter and 5.5 per cent in the March quarter.

June-quarter inflation came in at 4.3 per cent, 30 basis points below the RBI’s estimate.

“As increases in inflation continues to be driven by food and administered price increases, we expect the MPC to look through these higher inflation outcomes and persist with a pause for the remainder of 2026,” Aastha Gudwani, Chief India Economist at Barclays said in a note.