India’s Retail Inflation Rises to 0.71% in November, Still Below RBI Target

India’s yearly inflation rose to 0.71% in November, rebounding from October’s record low, as the drop in food prices eased, according to government data released on Friday, leaving scope for another interest rate cut. 

The print suggests that retail price rise may undershoot the Reserve Bank of India’s 2% inflation forecast for this fiscal year by about 15 to 20 basis points, opening space for another 25 basis point rate cut, economists said.

Annual inflation quickened to 0.71% in November from 0.25% a month ago as the pace of decline in food prices slowed. The print was in line with a Reuters poll of economists.

RBI Cuts 125 bps in 2025; Growth Risks From U.S. Tariffs Ahead

The Reserve Bank of India cut interest rates by 25 basis points earlier this month, saying the Indian economy is in a “rare goldilocks” phase of strong economic growth and moderate inflation. In 2025, the RBI’s rate-setting panel has lowered rates by 125 bps.

Whether growth slows in the second half of the fiscal year due to steep U.S. tariffs will be the focus for the central bank going forward, Paras Jasrai, an economist at India Ratings and Research, said.

PM Modi’s Reforms Seen Cushioning India From U.S. Tariff Impact

Indian Prime Minister Narendra Modi’s policies, including consumer tax cuts and labour reforms, are expected to limit the impact of U.S. tariffs on the South Asian economy.

Earlier this month, the RBI lowered its inflation projection for the fiscal year ending March 31 to 2% from 2.6% earlier and raised the growth forecast to 7.3% from 6.8%.

Vegetable, Pulses Prices Fall Sharply; Gold Keeps Core Inflation Elevated

In November, food prices fell 3.91% year-on-year after a decline of 5.02% a month ago. Vegetable prices fell 22.20% after a 27.57% decline in the previous month. Core inflation, which excludes volatile items such as food and energy and is an indicator of demand in the economy, was at 4.2%-4.3% in November compared with 4.4% in October, according to two economists. Core inflation stayed elevated partly because of firm gold prices, they said.

Cereal prices increased 0.1% in November against a 0.92% rise in October, while prices of pulses dropped 15.86% after a decline of 16.2% in the previous month. The impact of consumer tax cuts and ample food supply could lead to inflation averaging below 3% in the remaining part of the fiscal, said Sakshi Gupta, principal economist at HDFC Bank.

“This should provide room for the RBI to deliver another rate cut in the February policy if growth shows signs of losing momentum post the festive season,” Gupta said.

The RBI’s next policy meeting is on February 4-6. India will start publishing retail inflation data based on new base year, with updated data sources, from February 2026, which is expected to lower the weight of food, and raise it for non-food components.

Currently, food and beverages have a weight of 46% on the index.

(Inputs from Reuters)