The ministry notes that monsoon conditions, with above normal rainfall on average, are being reflected in the agricultural activity
Emphasising that headline inflation has been easing since October 2024 and has reached a low of 1.6 per cent in July 2025, the finance ministry has stated that higher sowing coverage supported by above-normal rainfall, comfortable buffer stocks and better output prospects for agriculture are expected to keep the food inflation rate quite low.
In its monthly economic review report, the Department of Economic Affairs emphasised that the stable pace of core inflation in the past six months has also moderated by 50 basis points to 3.9 per cent in July 2025. Inflation softened in all major sub-categories, except in fuel and lighting, where a slight uptick was observed.
“Favourable monsoon conditions, with above normal rainfall on average, are being reflected in the agricultural activity, with kharif sowing being completed in approximately 90.1 per cent of the normal area,” the ministry noted.
The report mentioned that domestic demand remained resilient in the first quarter of the current financial year (Q1FY26) as suggested by fast-moving consumer goods (FMCG) volume sales data, with rural markets sustaining faster growth. Notably, urban consumption showed signs of strengthening, with volume growth increasing at a higher pace compared to previous quarters.
“Building on this momentum, consumer spending on groceries, restaurants and utilities accelerated in July 2025, with UPI transaction volume rising by 35 per cent on a YoY basis. At the same time, rural consumption is supported by favourable progress in the monsoon, as evidenced in the higher growth of tractor and two and three-wheelers sales,” it said.
The Reserve Bank of India’s forward-looking surveys, published in August 2025, indicate a broad-based improvement in business conditions. Capacity utilisation has risen both sequentially and year-on-year, driven by an increase in new orders, while inventory levels have remained stable in Q4 of FY25.
