Retail inflation rises to 0.7% in November, but price pressures remain subdued

Inflation remains low for yet another month in November

India's retail inflation in November inched up to 0.7 percent, from 0.3 percent in October, but price pressures remained exceptionally subdued for the second straight month.

"The uptick was largely led by the narrowing deflation in the food and beverages segment, even as core inflation (CPI excluding F&B, F&L, and petrol and diesel for vehicles) eased marginally between these months," said Aditi Nayar, chief economist, Icra.

With food prices softening and GST rate cuts continuing to work their way through retail markets, headline inflation has averaged 1.8 percent so far this year—well below the Reserve Bank of India’s (RBI) target band of 2-6 percent.

In November, food deflation remained a low 3.9 percent compared with 5 percent decline in the previous month, as vegetables inflation remained a low -22 percent and pulses recorded a -15.9 percent decline during the month.

There was some softening in oils inflation and cereals, but fruits, egg, meat and fish, and milk inched up.

Sequentially, food prices were up 0.55 percent, with egg inflation rising 5.2 percent from October. Overall basket increased 0.3 percent compared with 0.15 percent the previous month.

Gold and silver, however, kept other categories up, with prices in metals up over 50 percent from the previous month. Coconut was also a major contributor to high inflation.

However, there was some easing on the core side, as inflation came in lower at 4.3 percent.

"Notably, the core inflation moderated sequentially to 4.3 percent in November 2025 from 4.4 percent in October 2025 as all the major sub-items saw a moderation in the inflation levels reflecting the impact of GST rate rationalization. This was despite personal care and effects inflation touching a fresh high of 24 percent in November 2025 mainly due to the increase in gold and silver prices," said Paras Jasrai, associate director, India Ratings and Research.

Low inflation to continue

The persistence of such low readings has prompted a series of downward revisions from the central bank. In its December monetary policy review, the RBI cut its FY26 inflation forecast to 2.1 percent, down sharply from 2.6 percent projected in October.

This is the fourth downward revision in this calendar year so far, making FY26 the first year in which the inflation projection has been adjusted in every policy meeting since April. By comparison, there was just one revision between April and December 2024 and two in all of 2023.

For the ongoing quarter, inflation has averaged 0.5 percent, broadly aligning with the RBI's expectations. Policymakers expect price pressures to firm modestly in the final quarter of FY26, rising to around 2.9 percent as favourable base effects fade.

Economists expect inflation to stay muted for the year, with not much upside in the coming year as well. Ind-Ra expects December print to be around 1 percent.

"The inflation has broadly come in line with expectations. While the inflation trajectory is expected to move upward from here on, we see the trajectory fairly benign until 1HFY27," said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank.

For the first half of FY27, the RBI projection stands at 4 percent, bringing inflation back to the midpoint of the target band.

Room for more cuts?

RBI's Monetary Policy Committee delivered another rate cut in the December meeting, bringing the policy rate down to 5.25 percent. The central bank has delivered 125 bps rate cuts since the start of the year.

Economists contend the central bank may hold in the February meet.

"In our view, the evolving inflation-growth outlook, as well as the fiscal policy measures unveiled by the next Union Budget, will guide the MPC's next decision. Our base case suggests a pause in the MPC's February 2026 policy review," said Nayar.

As Bhardwaj noted that the bank may have room for another 25 bps easing.

"Going ahead, with RBI having kept additional actions data dependent we see some room for 25bp of repo rate cut. However, the rate cutting cycle is clearly nearing the end, followed by a prolonged pause," she pointed out.