Will CPI Inflation Average 2.5% in FY26 with GST Cuts Supporting Core Inflation?
Click to start listening
Synopsis
The Crisil report predicts that CPI inflation will average 2.5% in FY26. The RBI's decisions will depend on data amidst global uncertainty. With GST cuts aiding core inflation and food deflation benefiting lower-income households, this analysis provides crucial insights into India's economic landscape.
Key Takeaways
- CPI inflation projected at 2.5 percent for FY26.
- RBI will focus on data for future rate decisions.
- Core inflation slightly decreased to 2.5 percent.
- GST cuts aiding core inflation amidst food deflation.
- Inflation effects vary across income groups.
New Delhi, Dec 13 (NationPress) According to a Crisil report, the consumer price index (CPI) inflation is projected to average 2.5 percent for the fiscal year (FY26). The Reserve Bank of India (RBI) is expected to remain data-driven in its future rate decisions, especially given the unpredictable global climate.
In November, CPI inflation increased to 0.7 percent from 0.3 percent in October, primarily fueled by a reduced rate of deflation in the food and beverages sector as well as an uptick in fuel and light inflation.
Core inflation, which excludes gold and serves as a more reliable measure of demand-side price pressures affected by goods and services tax (GST) adjustments, slightly decreased to 2.5 percent in November, down from 2.6 percent.
This moderation was aided by ongoing reductions in GST rates on essential goods, as noted in the report.
Despite a rise in gold inflation to 58.5 percent (up from 57.8 percent), core inflation remained stable at 4.3 percent.
Deflation in the food and beverages sector persisted for the third consecutive month, although the extent of this moderation slowed. Specifically, the food index's deflation narrowed to -3.9 percent, compared to -5.0 percent, due to diminishing deflation in vegetables and pulses as the base effect dissipates.
However, sectors such as non-alcoholic beverages, prepared meals, snacks, and sweets benefitted from the GST reductions, as highlighted in the report.
The report indicates that the impact of inflation varies across income brackets, reflecting differences in the spending share of food, fuel, and core categories.
For lower-income households, essential items like food and fuel constitute a larger portion of their consumption basket.
The report also stated, “As the food category remained in deflation in November, the rural poor, who allocate a significant portion of their spending to food, experienced the lowest inflation rate.”
“As the base effect on food diminishes, the headline CPI may see a slight increase. While low global crude prices are likely to keep fuel inflation in check, GST cuts are expected to support core inflation,” it added.
Point of View
It is imperative to understand the broader implications of CPI inflation trends on our economy. This report from Crisil sheds light on the delicate balance the RBI must maintain in its rate decisions amidst fluctuating global conditions. Our commitment at NationPress lies in delivering insightful analyses that keep our readers informed and prepared for the economic landscape ahead.
NationPress
13/12/2025
Frequently Asked Questions
What is the projected CPI inflation for FY26?
The projected CPI inflation for FY26 is expected to average 2.5 percent.
How does GST impact core inflation?
GST rate cuts are helping to lower core inflation by reducing prices on mass consumption goods.
What factors are influencing current inflation rates?
Current inflation rates are influenced by global economic uncertainty, changes in food and fuel prices, and GST adjustments.
How does inflation affect different income groups?
Inflation impacts various income groups differently, as lower-income households spend a larger portion of their income on essential items like food and fuel.
What is the outlook for CPI inflation in the coming months?
While food deflation is expected to ease slightly, the overall CPI is likely to increase modestly as the base effect diminishes.
