Low Inflation vs. Growth Slowdown: A Nuanced Look at the Indian Economy
UPSC Relevance
Prelims: Indian Economy (Inflation and its types - CPI, Core Inflation; Index of Industrial Production - IIP; Fiscal Indicators like GST and Tax Collections; Monetary Policy - RBI's role; Base Effect).
Mains: GS Paper 3 (Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Inflation).
Key Highlights from the News
Good News (Inflation):
Retail inflation in July 2025 reached a multi-year low of 1.55%.
The main reason for this is the decrease in food prices. This is a real price reduction, not just a statistical base effect.
Core inflation (excluding food and fuel) also decreased to 4.1%, which is close to the RBI's target.
Bad News (Growth Slowdown):
Despite the relief from inflation, the economy is showing signs of a growth slowdown.
Indicators of Slowdown:
Growth in the Index of Industrial Production (IIP) is at its lowest level in 10 months.
GST revenue growth has fallen to single digits.
Direct tax collections have decreased.
Car sales and UPI transactions have declined.
Main Argument of the Article: This reduction in inflation is only a "temporary blip." It alone is not enough to solve structural problems in the economy, such as weak demand.
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