The report added that changes in GST rates on services can reduce inflation on non-food items with a further 40-45 basic points, based on a passage of 50%.
With August’s inflation slightly above 2 percent Mark, the hope for a rate reduction in October is dimmed, SBI investigation said in his latest report.
The report added that the rate reduction also seems uncertain in December, especially when it is weighed against the stronger than expected growths for the first two quarters of the tax year.
“With the inflation of Augustus a bit higher than the 2 percent mark, a rate reduction in October looks heavy. Even a speed reduction in December looks a bit difficult if the growth numbers for Q1 and Q2 (estimates) are taken into account,” the report added.
The report added that changes in GST rates on services can reduce inflation on non-food articles by a further 40-45 basic points, based on a passage of 50 percent. The government has reduced the GST rates on many essential items (in total around 295), so that they have been brought from 12 percent to 5 percent or even zero. This tax reduction could reduce the inflation in these items in FY26 by 25-30 basic points, based on a passage of 60 percent for consumers, SBI ECOWRAP added.
After falling to a lowest point in 98 months of 1.55 percent in July 2025, Indian retail inflation (CPI) rose slightly to 2.07 percent in August, mainly due to higher food and drinking prices. The core inflation (which excludes food and fuel) also went to 4.16 percent.
Both national and urban areas saw an increase – rural inflation rose to 1.69 percent (from 1.18 percent in July), and urban inflation rose to 2.47 percent (from 2.10 percent).
This increase was partly due to the “base effect” wear, which means that the current price increases are no longer compared with very high prices compared to the previous year. Now the actual increase in prices appears clearer.
Of the 35 states and trade union areas, 26 had inflation under 4 percent in August. Only Kerala and Lakshadweep reported inflation above 6 percent. Interestingly, Kerala stood out as a buckier with inflation that hit 9.04 percent, driven by a strong rise in coconut oil prices – a staple in the state. In Kerala, inflation in the countryside hit 10.05 percent and reached urban inflation 7.19 percent.
In the field of weather conditions, heavy rainfall in important agricultural states such as Punjab, Haryana, Rajasthan and Gujarat can influence food supply and increase food prices in the coming months. The rainfall between August and the beginning of September was almost 9 percent above normal throughout India, with some states saw much higher levels.
Published on September 13, 2025
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