RBI's Inflation Control Measures Yield Results as CPI Drops to 2.7% in Q1 FY26

New Delhi, July 22, 2025 — The consistent efforts of the Central Government and the RBI have resulted in easing inflation to a multi-quarter low in Q1 of FY26. The Consumer Price Index (CPI) and Wholesale Price Index (WPI) were recorded at 2.7% and 0.4%, respectively. The RBI had earlier introduced a line of fiscal and monetary policy changes, including a repo rate cut in the last month.

Inflation Trends: CPI at 2.7%, WPI at 0.4%

According to data presented by Union Minister of State for Finance, Shri Pankaj Chaudhary, the inflation rate based on Consumer Price Index (CPI) and Wholesale Price Index (WPI) over the past three quarters is as follows:

The CPI inflation is now well within the RBI’s mandated tolerance band of 2%–6%, a target set under the flexible inflation targeting framework defined in the RBI Act, 1934.

Strategic Measures: RBI and Government Action

The RBI, under its Monetary Policy Committee (MPC), had raised the repo rate by 250 basis points between May 2022 and February 2023 to 6.5%. The rate remained unchanged till January 2025. As inflation moderated, the RBI cut the repo rate by 100 basis points from February 2025, supporting growth without stoking inflationary pressures.

Meanwhile, the central government has executed multiple administrative, fiscal, and trade-related interventions to ease price pressures and support the common citizen. These include:

• Buffer stock augmentation of essential food items.
• Open market sales of grains.
• Import facilitation and export curbs during shortages.
• Stock limits on select commodities.
• Retail sales of Bharat-branded food at subsidized rates.
• Free distribution of food grains to nearly 81 crore beneficiaries under the National Food Security Act.
• Income tax relief through exemptions up to ₹12 lakh annually (₹2.75 lakh for salaried individuals post-standard deduction).

Impact: Lowest Retail Inflation in 6 Years

The coordinated monetary and fiscal actions brought the average CPI inflation for FY25 down to 4.6%, from 5.4% in FY24 — the lowest in six years. Notably, retail inflation in June 2025 dipped further to 2.1%, confirming a broad-based softening in price levels.

Outlook

With the inflation outlook improving and economic stability returning, the government and RBI’s proactive stance signals a policy environment conducive to sustainable growth. The effectiveness of the inflation management framework also reaffirms institutional commitment to macroeconomic stability.

REF:https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2146815

Disclaimer:  At HDFC SKY, we take utmost care and due diligence in curating and presenting news and market-related content. However, inadvertent errors or omissions may occasionally occur.

If you have any concerns, questions, or wish to point out any discrepancies in our content, please feel free to write to us at content@hdfcsec.com.

Please note that the information shared is intended solely for informational purposes and does not make any investment recommendations