Retail food inflation remained in the negative zone for three consecutive months in August when it came in at (-) 0.69%, largely driven by subdued prices of vegetables, cereals, pulses, meat, eggs and spices. Food inflation was further in the negative zone in July (-1.76%) and June (-1.01%).
The consumer food price index (CFPI) rose 0.64% sequentially in August compared to July. In August last year, the food inflation rate was at 5.66%.
Deeper dive into the price of food items
The inflation in the vegetable category was (-) 15.92% last month, compared to (-) 21% in July. However, edible oil and fruit inflation remained high at 21.24% and 11.65% respectively last month.
Madan Sabnavis, chief economist, Bank of Baroda said, “edible oils continue to exert upward pressure with 21.2% inflation due to higher global prices as well as low base effect.”
Overall cereal inflation in August eased further to 2.7% and had been in single digits for the past several months because of softening price rise in rice. Rice inflation last month was only 0.97% on year.
Inflation in wheat last month was 4.3% against a price rise of 4.35% in July of last year. Inflation in mustard oil and refined oil were 24.18% and 23.46% respectively last month on year because of the rise in global prices. India imports about 58% of its edible oil consumption.
Inflation in pulses declined by 14.53% last month for seven successive months on the prospects of robust kharif as well as rabi harvest. Inflation in pulses was as high as 113% in August 2024
Looming threat of excess rainfall on crop yields
Experts have raised concern about the impact of surplus rainfall last months on the kharif crops.
“Despite the healthy trends in kharif sowing, large excess rains, and flooding in some parts of the country in late August 2025 and early-September 2025 could impact the kharif crop yields, and consequently output and prices, and thus, remain a key monitorable,” Aditi Nayar, chief economist, ICRA said.
The sowing of kharif crops – paddy, pulses, oilseed, sugarcane and cotton – has completed with total area under these crops at 110.54 million hectare (mha), higher than normal sown area of 109.6 mha and higher than the previous year.
“Excess rainfall and flooding in Punjab, Rajasthan and Telangana in August pose a risk to kharif crop production and could increase horticultural crop prices,” Dharmakirti Joshi, chief economist, Crisil, said.
The price rise in arhar continues to be in the negative zone since January, 2025 at – 29.35% last month because of a high base effect as fall in prices due to a record harvest after two years.
Inflation in the meat and fish category came in at 1.48% last month. Chicken declined by 2.99% in August. Egg prices rose by a modest 3.12% last month on year.
Inflation in spices continues to decline since September last year and stood at 3.24% in August on year. Jeera prices declined by 15% on year.