Inflation falling: Good news, but economic challenges remain

India’s year-on-year (YoY) headline inflation rate, based on the All India CPI, stood at 1.55% in July 2025, according to a PIB press release on 12 August 2025. This marks the lowest YoY inflation rate since June 2017.

- Kishore Kumar Biswas

For a country like India, where a large segment of the population falls within low-income brackets, low inflation is a welcome development as it eases the cost of living. However, the decline in inflation has been driven largely by falling food prices.

Food price inflation for July 2025 over July 2024 stood at -1.76%, the lowest since January 2019. Many observers have attributed this to effective economic management. Yet, several pressing challenges threaten the broader economic outlook.

Key Challenges Facing the Economy

Weak Direct Tax Collection