India’s retail inflation rate rose slightly in November, reversing the declining trend of previous months, driven largely by firmer food prices and a sharp rise in gold costs. Consumer Price Index (CPI) inflation stood at 0.71% in November 2025, up from 0.25% in October, and is expected to climb gradually to 2.7% by March 2026, according to early projections.
Food Prices Drive the Uptick
The modest rise in headline inflation was led by food and beverages, which continued to remain in deflation but at a slower pace. The category recorded a deceleration of -2.78% in November, compared with -3.72% in October, reflecting easing declines rather than outright increases.
Vegetables, pulses and spices remained in deflation, offering some relief to household budgets. However, fruits inflation rose to 6.87%, while inflation in oils and fats fell to 7.87%, marking continued volatility across food categories.
Gold Remains a Major Outlier
One of the most striking contributors to November’s inflation print was the soaring price of gold. The precious metal recorded inflation of 58%, significantly distorting the overall CPI trend. As a result, personal care and effects inflation moved higher, despite declines across several miscellaneous categories.
Excluding gold, headline CPI would have turned negative at -0.12% year-on-year, indicating persistent weakness in domestic prices. Analysts expect CPI excluding gold to remain in negative territory in December as well.
Imported Inflation Builds Up
Imported inflation has emerged as a growing concern, accounting for 1.6% of the CPI basket—driven mainly by higher global prices of gold and edible oils. Economists warn that the current positive CPI reading masks underlying pressures linked to import costs and the recent depreciation of the rupee, both of which could push inflation higher in the months ahead.
Rural–Urban Divergence Persists
Rural and urban inflation typically diverge due to differences in consumption patterns, with food carrying a higher weight in rural areas. Recent data has shown fluctuations, with rural food deflation easing and certain urban food components rising sharply. Items such as cereals, milk products, prepared meals and non-alcoholic beverages contributed differently across regions, adding to the variability.
Kerala reported one of the highest inflation readings in November at 8.27%, driven by steep increases in gold, silver and edible oil prices, with rural inflation reaching 9.34%.
GST Impact Moderates CPI
GST rationalisation has contributed modestly to lowering CPI inflation. New item-wise assessments indicate the tax adjustments reduced CPI by around 25 basis points over September–November, lower than earlier estimates of 85 bps. Accounting for deeper discounting during e-commerce festive sales, the total impact could reach 35 bps in FY26.
Outlook
Inflation is forecast at 1.8% for FY26 and 3.4% for FY27, but analysts do not expect the Reserve Bank of India to alter its policy stance in the upcoming February review.
