Food inflation remains negative for the second month in a row

Retail food inflation fell to (-) 1.76% in July, the lowest since 2019, driven by sharp declines in vegetable and pulse prices. Cereal inflation eased, while edible oil and fruit inflation stayed high. Strong kharif sowing and reservoir levels support further easing, though monsoon distribution remains key.

India’s retail food inflation stayed negative for the second month in a row in July, at (-) 1.76%, led by lower prices of vegetables, cereals, pulses, meat, eggs, and spices, alongside a favourable base effect. This is the lowest since January 2019, when food inflation was (-) 2.24%. However, the Consumer Food Price Index (CFPI) surged by 2.03% in July compared to June, though it remained well below the 5.42% recorded in July last year.

Vegetable prices fell sharply, with inflation in the category at (-) 21% compared to (-) 19% in June. 

Pulses inflation dropped 13.76% year-on-year, marking six consecutive months of decline due to robust harvest prospects and adequate imports. In contrast, pulses inflation had soared to 113% in August 2024. Analysts attribute the fall in vegetable and pulse prices to strong supply and a high base effect, expecting the trend to continue into August.

However, edible oil and fruit inflation remained elevated at 19.24% and 14.42%, respectively, supported by low base effects. 

Cereal inflation eased further to 3.03%, remaining in single digits for several months thanks to softening rice prices from a bumper harvest and encouraging kharif sowing trends. 

Meat and fish prices inched up 0.61% year-on-year, while egg inflation rose 2.26%. 

Spices inflation continued its downward trajectory since September 2024, falling by 3.07% in July.

Analysts said kharif sowing this year is likely to surpass last year’s levels, aided by favourable rainfall. However, they cautioned that the spatial and temporal distribution of the monsoon, as well as timely withdrawal, will be crucial for a successful harvest. As of early August, planting of key kharif crops — paddy, pulses, oilseeds, sugarcane, and cotton — had covered 99.5 million hectares, or 91% of the normal sown area of 109.6 million hectares.

Water availability has also improved significantly. The Central Water Commission reported that storage in India’s 161 major reservoirs reached over 72% of capacity as of August 7, 2025 — 14% higher than the same period last year and 33% above the 10-year average. This strong reservoir position bodes well for agricultural output, further supporting the easing trend in food inflation in the coming months.