Inflation will reduce in the country
The next two months in the country may be better in terms of reduction in inflation. According to a report by SBI Research, retail inflation of other items except gold is expected to be less than zero in the next two months. This shows a very low inflation environment in India. India’s CPI inflation fell to just 0.25% year-on-year in October, which is the lowest ever. The main reason for this is the fall in the prices of food items and drinks.
The prices of vegetables, pulses and spices continued to fall. Inflation of fruits and oil-ghee also reduced. But due to increase in gold prices, inflation of personal care products increased by 57.8%. Excluding gold, the main CPI reached -0.57%, i.e. it became negative. Core CPI at 4.33% in October remained at almost the same level as in September (4.36%). But after removing gold, core CPI dropped to 2.6%. SBI Research says that the recent improvement in GST rates has helped in reducing inflation. Earlier it was estimated that inflation would come down by 65-75 basis points, but actually it has come down by 85 basis points.
Figures are different in states
However, the level of inflation is not the same across states. The highest inflation of 8.56% was recorded in Kerala. After this, inflation was 2.95% in Jammu and Kashmir and 2.34% in Karnataka. Inflation is negative in 12 out of 22 states. Inflation in all the states except Kerala is less than 3%. Low inflation and more than 7% GDP growth in the second quarter of FY26, together, are posing a challenge for the RBI meeting in December. The report says that it will be difficult for the RBI to strike a balance between supporting growth and keeping inflation under control.
Challenge for RBI
The report said that November-December inflation, third quarter GDP figures and new CPI and GDP calculations will all influence future policies. RBI did not make any change in the policy rates in October, hence the scope for further changes has reduced. Given the strong growth and low inflation, any decision to reduce interest rates in future, especially in December, will have to be made very thoughtfully and clearly.
It has also been said in the report that adequate liquidity and balanced loan availability in the market is necessary so that the impact of interest rates reaches properly, because in the coming times the demand for loans may exceed the increase in deposits. With CPI expected to remain low for most of FY27, the RBI will face the “dual challenge” of low inflation and strong growth. This may make it difficult to make policies in the coming months.