Indian households anticipate modest commodity price increases amid declining inflation expectations

Indian households expect only modest increases in commodity prices, showed the latest central bank survey on inflationary expectations.

Households’ median perception on inflation in July declined by 50 basis points to 7.2% as compared with May 2025 round, reflecting in part the decline in consumer inflation to a six-year low.

The inflation expectations for the next three months and one year moderated by 60 bps and 50 bps respectively. One basis point is 0.01 percent.

The latest survey was conducted during July 1-12, in 19 major cities, with 5,197 valid responses. RBI conducts the survey at bi-monthly intervals. It provides directional information on near-term inflationary pressures as expected by respondents and may reflect their own consumption patterns.

The Reserve Bank of India Governor Sanjay Malhotra said that inflation outlook for 2025-26 has become more benign than expected in June. “Large favourable base effects combined with steady progress of the southwest monsoon, healthy kharif sowing, adequate reservoir levels and comfortable buffer stocks of foodgrains have contributed to this moderation,” he said while presenting the August monetary policy statement.

The latest survey saw 79.5% of respondents expecting prices to rise in general as compared with 80.5% of respondents in the May round. A year ago, 82.3% expected prices to rise. In terms of food items, 80% expect prices to rise in July against 82.8% in May and 84.2% a year back, reflecting that more households are getting comfortable on price rises.More households however now believe that prices of durable goods and cost of services are to increase. About 67.4% respondents expect prices of household consumer goods to rise as against 66.3% expecting a rise in the previous round of survey. The percentage of households was 71.7% against 69.6% respectively for the last two rounds when it comes to cost of services.Inflation measured by Consumer Price Index, however, is likely to rise above 4% in the fourth quarter due to unfavourable base effects and expected rise in demand, said RBI.

The central bank projected the CPI inflation for 2025-26 at 3.1% with second quarter print at 2.1%, third quarter print at 3.1% and fourth quarter print at 4.4%. Meanwhile, RBI has projected CPI inflation for the first quarter of the next fiscal 27 at 4.9%.