In August 2025, inflationary pressures in India continued to ease, with the Bank of Baroda Essential Commodities Index (BoB ECI) remaining in deflation for the fourth consecutive month. The index fell by 1% year-on-year, driven by significant price drops in key food items such as onions (-37.5% YoY) and potatoes (-31.5% YoY). Pulses like Tur/Arhar also saw a decline of 29% YoY. The improved supply and better kharif sowing have contributed to this trend, with tomatoes correcting downward after a brief price spike.
On a month-on-month basis, the index rose by 1%, which analysts attribute to seasonal effects rather than a reversal in inflationary momentum. This easing trend has continued into September, with the index tracking at -0.9% YoY in the first nine days. Global factors have also supported the decline, with favorable prices for cereals, energy, and metals. The GST rate cuts on FMCG and durable goods are expected to reduce headline CPI by 55-75 basis points.
Bank of Baroda projects consumer price inflation to settle around 2%, with downside risks persisting. However, the report highlights potential risks, including uneven monsoon patterns in some onion- and potato-growing states, which could impact prices. Domestic edible oil prices may also remain high due to strong global demand. Despite these risks, the data indicates that India’s inflation outlook is stabilizing, offering relief to policymakers and consumers ahead of the festive season.
The decline in inflationary pressures is a positive sign for the Indian economy, and the projected consumer price inflation of 2% is a significant improvement. The easing trend in the BoB ECI and the favorable global factors are expected to support this projection. While there are potential risks, the overall outlook suggests that inflation is under control, and the economy is moving in a positive direction. This stability in inflation will likely have a positive impact on consumer spending and economic growth, making it a welcome development ahead of the festive season.