Retail Inflation Inches Up to 0.71% in November

Retail Inflation Inches Up to 0.71% in November

Why in News? 

Recently, India’s retail inflation edged higher to 0.71 percent in November on an annual basis, according to the data released by the Ministry of Statistics and Programme Implementation (MoSPI). This marked an increase from the record low of 0.25 percent seen in October.

Trends in Retail Inflation of November 2025 CPI Data

• The Consumer Price Index (CPI) data released by the Ministry of Statistics and Programme Implementation (MoSPI) shows that India’s retail inflation rose to 0.71 per cent in November 2025 on a year‑on‑year basis. This rate is 46 basis points higher than the 0.25 per cent recorded in October 2025. The provisional CPI figure reflects a slight upward movement in overall price levels compared to the previous month while still remaining moderate. 
• Over the past year, inflation in India has shown a marked decline from much higher levels seen in 2024. Inflation in November 2024 was around 5.48 percent, compared with the marginal 0.71 per cent in November 2025. This dramatic fall reflects persistent disinflationary pressures across categories, especially in food items.
• Food inflation, measured by the Consumer Food Price Index (CFPI), continued to stay negative at –3.91 per cent in November 2025, despite narrowing from –5.02 per cent in October 2025. The contraction in food inflation has been a key reason that overall CPI inflation has remained subdued throughout 2025. 
• The CPI data for November 2025 also shows important differences between rural and urban inflation. In rural areas, the headline inflation rate increased to 0.10 per cent, up from –0.25 per cent in October 2025. In urban areas, inflation rose more sharply to 1.40 per cent, compared with 0.88 per cent in October 2025. These differences reflect varying consumption patterns. 
• Aside from food, other components of the CPI basket show distinct trends. Housing inflation in November 2025 was 2.95 per cent, almost unchanged from October. Education inflation eased to 3.38 per cent, and health inflation declined slightly to 3.60 per cent. Transport and communication inflation was lower at 0.88 per cent, while fuel and light inflation increased to 2.32 per cent from the previous month.

Factors Driving the November Inflation Increase

• Slower Decline in Food Prices: The rise in inflation in November 2025 happened mainly because the rate of food prices falling slowed down sharply. When food prices stop falling as fast, the overall index naturally rises even if prices are still lower than last year.
• Vegetable and Perishable Price Movements: Prices of some perishable items like vegetables and other produce rose in November after prolonged weakness. As these prices increased, they pushed the headline inflation rate upward. 
• Increase in Fuel & Light Costs: Another factor behind the inflation uptick was a rise in the cost of fuel and electricity services. Higher fuel prices raise transport and household energy costs, and these gains feed into the general price index, lifting headline inflation.
• Base Effects: The comparison base for October 2025 was unusually low because inflation in that month fell. When a base period has exceptionally low values, any small rise in prices in the next month makes the year‑on‑year percentage change appear larger. This statistical effect helped push the November inflation.
• Core Inflation: While food and fuel explain much of the headline movement, core inflation — which excludes food and energy — remained modest but did not fall further. These underlying price pressures lent support to overall inflation even as some commodity prices were soft.

Retail Inflation in India

• • Definition: Retail inflation measured by the Consumer Price Index (CPI), is the rate at which the prices of a fixed basket of goods and services commonly purchased by urban and rural households rise over time. It indicates the erosion of purchasing power of the currency.
  • Measurement: The National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation (MoSPI), compiles the CPI (Combined, Rural, and Urban) data monthly.
  • Base Year: The current base year for CPI calculation is 2012.
  • Formula: The inflation rate is calculated as the percentage change in the CPI from one period to another (usually year-on-year).  

• CPI Basket: The CPI basket has a higher weightage for food items, which makes the overall inflation rate in India highly susceptible to food price volatility. Food and Beverages (~45.86% weight), Miscellaneous (education, healthcare, transport, communication, etc., ~28.32%), Housing (~10.07%), Fuel and Light (~6.84%) and Clothing and Footwear (~6.53%).

• Factors: Inflation is typically driven by demand-pull or cost-push factors, or a combination of both. 
  • Demand-Pull Factors: When aggregate demand exceeds supply (e.g., increased money supply, higher government spending, rising incomes).
  • Cost-Push Factors: Driven by increased production costs (e.g., rising raw material costs, higher wages, supply chain disruptions, increased indirect taxes, or global commodity price shocks like crude oil).
  • Structural Issues: Inefficiencies in the supply chain, infrastructure bottlenecks, or a high number of middlemen can also contribute to price rise.
  • External Factors: Global oil price volatility and Rupee depreciation increase the cost of imports, leading to imported inflation.
  • Seasonal Factors: Unseasonal rains or droughts can significantly impact agricultural output and food prices due to their high weight in the CPI basket. 

Implications for the Indian Economy

• Effect on Monetary Policy: The Reserve Bank of India (RBI) monitors inflation closely when setting the policy repo rate. In 2025, retail inflation remained below the RBI’s target range of 2 per cent to 6 per cent for several months, including November at 0.71 per cent. This persistent low inflation has given the RBI room to cut interest rates, supporting growth by lowering borrowing costs for businesses and households. A low inflation environment often leads to looser monetary policy to encourage investment and credit demand. 

• Impact on Consumer Purchasing Power: When inflation is low, consumer prices rise slowly or remain stable. In November 2025, inflation of 0.71 per cent meant that prices for most goods rose much less than in prior years when inflation was higher. This increases the real purchasing power of households. People can buy more goods and services with the same amount of money. Stable and low prices also help low‑income families cope with essential expenses such as food, transport, and utilities.

• Influence on Investment & Business Sentiment: Businesses make decisions about investment, expansion, and hiring based on expected prices and demand. When inflation stays low and stable, companies face less uncertainty about future costs. This environment can support long‑term planning and capital spending. At the same time, ultra‑low inflation can reflect weaker demand conditions, making firms cautious about scaling up production or hiring. 

• Government Fiscal Outcomes: Low inflation has direct implications for government revenue and budget planning. The Government of India reduced GST rates in 2025 to support consumption and lower retail prices. These cuts can reduce tax revenue in the short run but may stimulate aggregate demand if consumers spend more. A slower rise in prices may also slow growth in nominal GDP. If nominal GDP grows less than expected, tax collections such as income and corporate taxes might increase at a slower rate.