Rise in retail inflation

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Context:

Retail inflation (CPI) in India rose to 0.71 % in November 2025, up from a record low of 0.25 % in October 2025.

What are the key highlights of Retail inflation in India?

• Retail inflation (CPI) rose marginally to 0.7% in November 2025, up from the historic low of 25% in October 2025, but remained the second-lowest since January 2012.
• Food prices continued to contract, declining by 8% year-on-year, which played a decisive role in keeping overall inflation extremely low.
• Fuel and light inflation accelerated slightly to 2.3%, compared to 2% in October 2025, exerting mild upward pressure on the headline inflation number.
• Edible oils showed notable inflation (7.9%), with mustard oil and coconut oil emerging as key contributors, even as overall food inflation remained negative.
• Inflation in pan, tobacco, and intoxicants edged up to 3%, while clothing and footwear inflation eased marginally to 5%.
• Housing inflation remained stable at around 95%, indicating steady rental and housing-related price trends.

What is Retail Inflation?

Retail inflation refers to the general increase in prices of goods and services purchased by households for day-to-day consumption, reflecting the cost that consumers actually face in markets and shops.

In India, retail inflation is measured through the Consumer Price Index (CPI), which monitors changes in the prices of a representative basket of essential goods and services commonly consumed by households.

The base year for CPI calculation is 2012, which serves as the reference point for measuring price movements over time.

The CPI data is compiled and released every month by the Ministry of Statistics and Programme Implementation (MoSPI), providing a key indicator of price trends in the economy.

The Reserve Bank of India (RBI) uses CPI inflation as the primary benchmark for monetary policy and seeks to maintain inflation within a target range of 2% to 6%, balancing price stability with economic growth.

Why retail inflation is still low in India?

Sharp Contraction in Food Prices: Food and beverages account for around 46% of the CPI basket, making food inflation the most decisive factor in retail inflation.

• In November 2025, food prices contracted by 2.8% year-on-year, compared to 2% inflation in November 2024.
• Vegetable prices declined sharply, with potatoes, onions, and tomatoes witnessing significant price corrections.

Strong Base Effect: Inflation is measured on a year-on-year basis, and the comparison base for 2025 was unusually high.

In late 2024, food inflation was elevated due to weather shocks and supply disruptions.

Stable Core Inflation

Core inflation (excluding food and fuel) remained contained, reflecting subdued demand-side pressures.

• Housing inflation stayed stable at around 95%.
• Clothing and footwear inflation eased to 5% in November 2025.
• Services inflation did not show sharp acceleration, indicating limited pricing power among firms.

What are the measures needed to reverse the trend?

Boosting rural demand and incomes: Low inflation driven by falling food prices can hurt farm incomes. To counter this, the government supports rural purchasing power through:

• PM-KISAN income support transfers to farmers
• Higher MSP procurement for cereals and pulses
• Expansion of MGNREGA allocations during periods of weak rural deman

Rationalising Food Supply Interventions

While aggressive supply-side controls help curb inflation, the government may gradually calibrate interventions to avoid excessive price suppression:

• Phased easing of export restrictions when domestic supplies stabilise
• Moderated release of buffer stocks
• Allowing market signals to play a greater role once price stability is achieved

Support to Consumption through Welfare Schemes

Continuation and rationalisation of welfare schemes such as:

• Free foodgrain distribution: National Food Security Act (NFSA), 2013 and Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).
• Housing support: Pradhan Mantri Awas Yojana – Gramin (PMAY-G) and Pradhan Mantri Awas Yojana – Urban (PMAY-U).
• Health and education spending: Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (PM-JAY), Samagra Shiksha Abhiyan and Mid-Day Meal Scheme / PM POSHAN.

These measures reduce distress but also free up household income for discretionary spending, supporting demand-led price normalisation.

Conclusion:

Retail inflation in India has remained exceptionally low in recent months, driven mainly by a sharp contraction in food prices, favourable base effects, and proactive supply-side interventions by the government. Despite a marginal uptick due to fuel and select non-food items, inflation continues to stay well below the RBI’s comfort zone, indicating subdued demand pressures. Overall, the trend reflects a phase of price stability, though sustained low inflation calls for careful policy calibration to avoid deflationary risks while supporting growth.

Source: The Hindu