This is the first time in nearly five years that retail inflation has fallen below the target of 4 percent, the last time this happened in September 2019.

According to government data released on Monday, retail inflation eased to 3.54 percent in July, bringing relief to citizens. This is the first time in nearly five years that retail inflation has fallen below the Reserve Bank's target of 4 percent as food prices cool, data has revealed.

According to data released by the National Statistics Office (NSO), inflation in the food basket was 5.42 percent in July, down from 9.36 percent in June. Similarly, Consumer Price Index (CPI) based retail inflation was 5.08 percent in June 2024 as against 7.44 percent in July 2023.

This is the first time in nearly five years that retail inflation has fallen below the target of 4 percent, the last time this happened in September 2019.

The government has tasked the Reserve Bank of India (RBI) to ensure that CPI inflation remains at 4 per cent with a margin of 2 per cent on both sides.

RBI maintains growth, inflation forecasts

Last week, the RBI maintained its growth and inflation forecasts for the current fiscal year at 7.2 percent and 4.5 percent, respectively, amid expectations of a normal monsoon.

In the last bi-monthly monetary policy review in June, the RBI had forecast real GDP growth and marginal inflation.

RBI Governor Shaktikanta Das, while announcing the bi-monthly monetary policy, said that improved agricultural activity would brighten prospects for rural consumption, while sustained growth in services activities would support urban consumption.

“Healthy balance sheets of banks and corporates; government's emphasis on capex; and signs of pick-up in private investment will boost fixed investment activity. Improvement in global trade is expected to support external demand,” he said.

Spillovers from prolonged geopolitical tensions, instability in international financial markets and geo-economic fragmentation, however, pose downside risks, he said.

Taking all these factors into account, he said, real GDP growth for 2024-25 is estimated at 7.2 per cent, 7.1 per cent in the first quarter; Q2 7.2 percent; Q3 7.3 percent; and Q4 7.2 percent.

Real GDP growth is expected at 7.2 per cent for Q1 FY26, he said, adding that risks are evenly balanced.