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India’s headline retail inflation rate based on the Consumer Price Index (CPI) rose slightly in November to 0.71 per cent from October’s record low of 0.25 per cent, data released on Friday by the Ministry of Statistics and Programme Implementation (MoSP) showed. Inflation was dragged higher by an unfavourable base effect, which was particularly strong for food items. Despite the unfavourable base, food prices were down on a year-on-year basis for the sixth month in a row in November, this time by 3.91 per cent. In October, food prices were down by a larger 5.02 per cent.
“The marginal uptick in retail inflation was on account of decline in the food deflation,” said Paras Jasrai, Economist at India Ratings & Research. “The deflationary trend in food items was led by strong deflation in vegetables and pulses and products. Even the cereals inflation recorded a 50-month low level of 0.1 per cent in November helped by a favourable Kharif sowing season,” Jasrai added.
Deflation refers to inflation being below zero or in the negative territory, implying that prices in a month are lower compared to the same month last year.
The RBI angle
At 0.71 per cent, the latest headline inflation print is along expected lines and below the Reserve Bank of India’s (RBI) medium-term target of 4 per cent for the 10th month in a row. The number is also below the lower-bound of the central bank’s flexible inflation targeting range of 2-6 per cent for the third straight month.
The CPI data for November comes days after the RBI’s Monetary Policy Committee (MPC) last week cut the policy repo rate by 25 basis points (bps) to 5.25 per cent, with Governor Sanjay Malhotra saying that while inflation is set to rise in the coming months – the central bank has forecast prices to rise 0.6 per cent on average in October-December, 2.9 per cent in January-March 2026, 3.9 per cent in April-June 2026, and 4 per cent in July-September 2026 – “underlying inflation pressures are even lower” as sharply higher precious metal prices were lifting headline inflation by as much as 50 bps.
To meet the RBI’s forecast of 0.6 per cent average inflation in October-December, retail prices can rise by at most 0.98 per cent in December, data for which will be released on January 12 by the statistics ministry. Jasrai of India Ratings expects CPI inflation for December to be near 1 per cent, with food prices remaining “benign” in the first 11 days of the month.
November inflation internals
Among the broad food categories, prices were down on a year-on-year basis in November for vegetables (22.2 per cent lower), pulses (15.86 per cent lower), and spices (2.89 per cent lower). However, vegetable prices were 2.6 per cent higher in November when compared to October, while those of pulses were up a minor 0.1 per cent. The largest month-on-month increase in prices was for eggs, which were 5.2 per cent more expensive compared to the previous month.
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On the whole, food prices were up 0.5 per cent in November compared to October.
The price momentum – indicative of price pressures from one month to another – was broadly subdued in non-food categories. Clothing and footwear prices were up 0.1 per cent month-on-month, while housing and fuel were each up 0.2 per cent.
The ‘miscellaneous’ category, which comprises household goods and services, saw its price index rise 0.2 per cent in November from October, mostly due to the ‘personal care and effects’ sub-category seeing a 0.5 per cent increase, which led to the inflation figure for the same – or the year-on-year change in prices – at an all-time high of 24.04 per cent due to elevated gold and silver prices.
The CPI basket contains 299 items, two of which are gold and silver. While these two items together make up only 1.19 per cent of the entire basket, an astronomical rise in their prices in recent times has greatly influenced the headline retail inflation rate. Gold and silver inflation both hit new record highs of 58.32 per cent and 65.52 per cent, respectively, in November.
Steady core inflation
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Elevated gold and silver inflation was the reason why core inflation – or inflation excluding food and fuel items – did not fall and was broadly steady at 4.4 per cent in November, according to calculations by The Indian Express. This upward pressure on core inflation from the gold and silver prices was nullified by the continued impact of the Goods and Services Tax (GST) rate cuts that took effect on September 22.
With headline inflation subdued – the average for the first eight months of 2025-26 is 1.8 per cent, lower than the RBI’s full-year forecast of 2 per cent – economists see a chance that the MPC may cut interest rates again at its next meeting in early February.
“The movement of inflation is on expected lines and would tend to move upwards in Q4 (January-March 2026). With GDP growth also to moderate in Q3 (October-December) and Q4, this can be a reason for another rate cut by the RBI as conditions are like those in December when the repo rate was reduced. Therefore, there seems just about an even chance of there being another rate cut in Feb based on these conditions,” Madan Sabnavis, Bank of Baroda’s Chief Economist, said.
The MPC is scheduled to meet next from February 4-6. So far in 2025, it has reduced the repo rate by 125 bps.
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