That figure is down from 7.25% in June and 7.55% in May.

 

The slowing inflation was largely due to fuel prices, although the rises in food prices also slowed slightly.

 

While inflation is still higher than the government would like, the figures make an interest rate cut more likely in September, when the next Reserve Bank of India decision is due.

 

"The September rate decision will likely be a judgment² call by the central bank on whether they want to show confidence in the new finance minister and support growth, or stick to the tougher line," said Dariusz Kowalczyk at Credit Agricole CIB in Hong Kong.

 

"Weak industrial output and very poor exports suggest that there is rate cut scope, but we need to see how the monsoon³ develops and what the outlook will be for food prices by then."

 

Food prices rose just over 10% in the year to July, down from the 10.8% in the year to June.

 

Fuel inflation slowed to 6.0% in July from 10.3% in June.

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