KEY TAKEAWAYS:  India’s CPI climbed to 0.71% YoY in Nov-25 from the unprecedented low of 0.25% in Oct-25, largely in line with forecasts. Nov-25 is now the third straight month of inflation below the 2% lower band and the tenth consecutive month below the 4% target. On a sequential basis, CPI posted a marginal increase of 0.30%, slightly softer than the median increase of 0.41% MoM usually seen in the month of November.  As such, annualized food and beverages inflation eased further into negative territory, moderating to –2.78% in November. (vs. a record low of –3.72% in Oct) While fuel inflation turned up for the first time in five months, underlying inflation pressures continued to ease, as core inflation softened slightly to 4.4% YoY and metals-excluded core dropped to a record low.  GST rationalisation continues to temper inflation for the second consecutive month, albeit with a weakening disinflationary impulse. While signs of bottoming out are visible in food prices, the near-term backdrop remains supportive given above-normal monsoon performance, comfortable reservoir levels, and strong Rabi sowing progress (75% of normal area) led by Wheat. Meanwhile, FYTD inflation remains subdued at an avg. of 1.78%, but with CPI past its Oct-25 trough, risks are shifting upward as uneven monsoon rains likely affected kharif output and could lift select food prices higher, alongside rupee-driven pass-through, strong precious-metal inflation, and improving domestic demand aided by fiscal and monetary policy support. As such, we continue to hold our FY26 CPI inflation projection at 2.1%.

India’s CPI inflation rose to 0.71%YoY in Nov-25 from a record low of 0.25% in Oct-25, broadly in line with expectations. With this, Nov-25 marks inflation below the lower threshold of inflation band for the third consecutive month and below the 4.0% target for the tenth consecutive month.

 

Key highlights of Oct-25 data

 

• On a sequential basis, CPI posted a marginal increase of 0.30% MoM, slightly softer than the series median increase of 0.41% MoM usually seen in the month of November. 
• As such, annualised Food & Beverages inflation continued to contract, albeit at a lower pace of -2.78% in Nov-25 from a record low of -3.72% in Oct-25.
• Sequentially, the food basket exhibited a broad-based increase in prices with only a handful of sub-categories recording decline in the month – namely, Fruits (-0.92% MoM), Non-alcoholic Beverages (-0.16% MoM) and Sugar & Confectionery (-0.07% MoM). 
• In contrast, the build-up in price momentum within Food & Beverages was led by a sharp increase in Eggs (+5.24% MoM) and Vegetables (+2.55% MoM), along with Meat & Fish (+0.48% MoM) and Spices (+0.41% MoM).
• Consolidated fuel inflation rose to 1.8%YoY vs. 1.6% in Oct-25, marking the first uptick in last 5 months. A sequential increase in the price of non-subsidised and PDS Kerosene (1.16% and 0.84%) along with Firewood & chips (+0.78% MoM) led the upside. The gains were partly tempered by a decline in Charcoal prices (-1.13% MoM) after having risen in the previous month. 
• Core CPI inflation (represented by the CPI excluding indices of Food & Beverages, Fuel & Light, and petrol and diesel items within the Miscellaneous basket) eased marginally to 4.4% YoY, compared with 4.5% in Oct-25.
  1. Core-Core CPI inflation (represented by the exclusion of gold and silver indices from Core CPI) declined further to 2.4% YoY from 2.6% in the previous mark – a fresh record low. 

 

Inference and Outlook

 

Nov-25 CPI inflation highlights two developments –

One, inflation continues to benefit from the GST rationalization induced cut in prices for the second consecutive month. Having said, the magnitude of price moderation appears to be waning now. This can be attributed to various reasons – post festive season realignment in demand as well inventory, as also some impact of Rupee depreciation on imported items. As such, we continue to maintain that despite GST led annualized disinflationary impulse of ~130 bps, the actual impact will be much lower at about 60-70 bps. 

 

Second, it appears that food prices are bottoming out. We have seen moderate yet broad-based price build-up across food categories in Nov-25. Within vegetables, tomato prices (as per daily mandi data) have clocked double-digit increase yet again, so far in Dec-25. 

 

Having said, the outlook on food prices for the near term continues to remain comforting. The above normal monsoon turnout this year along with comfortable reservoir levels, have allowed a timely and swift progress of area sown under Rabi crop. As of Dec 9, 2025, nearly 75% of the normal area has been sown, with an annualized growth of 6.2% led by Wheat.

 

The FYTD inflation story (averaging at 1.78%) has turned out to be one of extreme comfort. Having said, we believe CPI inflation bottomed out in Oct-25, and the trajectory is likely to be upwards hereon. Some of the emerging upside risks that one needs to be watchful of:  

• The skewness in the geographical distribution of southwest monsoon rains worsened towards the end of the season with delayed withdrawal continuing in Oct-25. This is likely to have harmed kharif produce especially in Maharashtra, Punjab and Rajasthan and could push select food prices higher.
• The 5.6% depreciation in the INR is likely to add to inflationary pressures with a lag. As per the RBI’s estimates, a 5% depreciation in the rupee could increase CPI inflation by 30-35 bps via the import channel over the course of 1 year.
• Prices of precious metals - gold and silver - continue to see sharp increases on annualized basis, amidst heightened geoeconomic and geopolitical uncertainty. 
• Recovery in domestic consumption underpinned by RBI’s monetary policy support via 125 bps of cumulative rate cuts, overall surplus monsoon, FY26 budgetary provision of income tax relief, GST rate cuts could add some upward bias to core inflation in the medium term.
• CPI inflation is likely to edge up, especially during Q4 FY26, as favourable base effects fade away. 

 

Overall, we maintain our FY26 CPI inflation estimate at 2.1%.

 

Table 1: Overview of key sub-components of inflation 

Note:

1) CPI-Consolidated Fuel index includes Fuel & Light and Petrol & Diesel indices from the Miscellaneous basket.

2) CPI-Core excludes Food & Beverages and Consolidated Fuel indices from Headline CPI.

3) Readings under the memo items are derived from imputed indices. Figures have been rounded off.