On August 5, the Reserve Bank of India made a bet. Its Monetary Policy Committee voted unanimously to leave the repo rate unchanged at 5.25%, even as food prices have been pushing headline inflation higher. Governor Sanjay Malhotra described the RBI’s position as “neither dovish nor hawkish,” saying the current rate is simply the right one for now.
The bet is this: inflation is rising, but not in a way that worries the RBI yet. June’s retail inflation came in at 4.38%, the highest since December 2024, driven almost entirely by food — ginger prices were up over 50% year-on-year, tomatoes up nearly 32%. Malhotra’s case is that this pressure is narrow, not broad-based: core inflation, which strips out food and fuel, has stayed contained at around 4%, and the RBI expects headline inflation to cool again after it peaks in the months ahead.
That bet gets tested soon. July’s official inflation data lands on August 12, and expert estimates vary widely — a Reuters poll of 40 economists puts the consensus at around 4.5%, with individual forecasts ranging from under 4% to as high as 5.5%. A high number makes the RBI’s wait-and-watch stance harder to defend heading into its next meeting, scheduled for October 5-7.
The root of the food-price problem was a rough start to the monsoon. Rainfall ran roughly 35-40% below normal through June, with states including Meghalaya and Jharkhand among the worst hit. That’s exactly the kind of shock that shows up fastest in vegetable prices — crops like tomatoes and ginger are seasonal, perishable, and impossible to stockpile.
But the monsoon has since largely recovered, and this is the quieter half of the story that hasn’t gotten much attention: July itself brought a rainfall surplus, narrowing the June-July shortfall to about 13%, and by August 5 the cumulative deficit for the whole season had shrunk to just 11%. The weather problem behind June’s price spike is mostly behind us.
Except it might not stay that way. The India Meteorological Department is now forecasting below-normal rainfall for August itself, as El Niño conditions are expected to strengthen through the month — which could reopen the exact food-price pressure the RBI is currently betting will fade.
For now, the central bank is holding steady on a read that June’s spike was temporary. August 12 is when we find out whether that read holds up.
Sources: Zee Business / Forbes India, RBI MPC coverage (Aug 5, 2026) · CNBC, “India’s inflation accelerates to 4.38% in June” (Jul 13, 2026) · Business Standard, “Monsoon rainfall records deficit of 11% compared to LPA” (Aug 7, 2026) · Investing.com/Kedia Advisory, monsoon-deficit narrowing report (Aug 2026) · Reuters poll via WTVB, July CPI forecast (Aug 7, 2026)