India’s consumer inflation edged up to 0.71% in November, rising from the record low of 0.25% in October, according to government data released on Friday.
The latest CPI figure matched the Reuters poll estimate of 0.70%, signaling that the slowdown in food and fuel price declines has begun to lose momentum.
What Drove the Inflation Increase?
The government cited higher prices in:
- Vegetables
- Eggs, meat, and fish
- Spices
- Fuel and light (up 2.32% in November vs 1.98% in October)
Inflation rose in both urban and rural regions, confirming a broad-based uptick.
RBI’s Rate Cut and Outlook
India’s low inflation environment, combined with weakening economic indicators, pushed the Reserve Bank of India (RBI) to cut policy rates by 25 basis points last week.
The central bank expects:
- FY 2025–26 inflation: 2% (revised down from 2.6% in October)
- January–March CPI: 2.9%
- September 2026 CPI: 4.0%
The RBI said the “benign inflation outlook” gives it space to support growth.
RBI Governor Sanjay Malhotra added that the bank will continue meeting the economy’s productive requirements “in a proactive manner.”
Experts remain split on whether the latest rate cut marks the end of the current easing cycle.
HSBC Research noted:
“Weaker growth, low-for-long inflation, and tight fiscal policy may require growth supportive monetary policy in 2026 as well.”
Impact of U.S. Tariffs and Global Trade Pressures
In August, the U.S. imposed an additional 25% tariff on Indian imports, pushing total duties up to 50% on key sectors like:
- Textiles
- Gems and jewellery
- Marine products
Though exports to the U.S. form only ~2% of India’s GDP, prolonged pressure on these labor-intensive sectors could eventually trigger job losses and disrupt growth.
Government’s Response: GST Cuts and Festive Demand Boost
To soften the tariff impact, India reduced GST rates on several items on Sept. 22 ahead of the festive season.
This triggered lower prices for:
- Consumer goods
- Vehicles
- Farm products
The cuts helped boost domestic consumption, but export performance continues to weaken.
Exports, Rupee Under Pressure
India’s exports to the U.S. fell for the second straight month in October, down 8.5% YoY to $6.3 billion.
Overall exports also dropped 11.8%, reaching $34.38 billion.
With no trade settlement between India and the U.S. in sight, the Indian rupee hit record lows, sliding below the ₹90 per USD mark.