The consumer price index (CPI) inflation is likely to average 2.5 per cent this fiscal (FY26) and the Reserve Bank of India (RBI) will stay data dependent on future rate decisions, especially amid an uncertain global backdrop, according to a Crisil report. Inflation based on CPI quickened to 0.7 per cent in November from 0.3 per cent in October, driven by the slower pace of deflation in the food and beverages category and a pick-up in fuel and light inflation.
Core inflation excluding gold — a better indicator for measuring demand-side price pressures and assessing the impact of goods and services tax (GST) rationalisation — eased slightly again in November (2.5 per cent compared to 2.6 per cent). It was helped by the continuing pass-through of lower GST rates on mass consumption goods, said the report.
The surge in gold inflation (58.5 per cent compared to 57.8 per cent), though, kept core inflation steady at 4.3 per cent. While deflation in the food and beverages category continued for the third straight month, the magnitude of the moderation slowed. This was particularly in the food index, where deflation narrowed to -3.9 per cent from -5.0 per cent, due to slowing deflation in vegetables and pulses as the base effect fades out.
However, non-alcoholic beverages, and prepared meals, snacks and sweets enjoyed the benefits of GST rate cuts, the report mentioned. According to the report, the effect of inflation varies across income groups since spending share of food, fuel and core categories differs.
Essential items, such as food and fuel, account for a greater share of the consumption basket for lower income households. “Since the food category remained in deflation in November, the rural poor, which have the highest share of food in their consumption baskets, saw the lowest inflation rate,” the report mentioned.
“As the base effect on food fades, headline CPI is likely to edge up slightly. While weak global crude prices should continue anchoring fuel inflation, GST rate cuts will support core inflation,” it noted.
