India Inflation Returns to RBI Tolerance Band

The inflation rate in India rose to 2.75% in January of 2026, firmly above market expectations of 2.4%. The result marked the first inflation rate within the RBI's tolerance band of 2%-4% since August of the previous year. The rate was the first measurement in India's new CPI, which updated the weights of different goods within the index according to the Household Consumption Expenditure Survey from two fiscal years ago. Food inflation, which now accounts for a much smaller portion of the Indian consumer basket, surged to 2.13% from the -2.71% in the previous month, which used the old aggregators for the index. Meanwhile, inflation was elevated for personal care and social protection (19.02%), health (2.19%), and clothing and footwear (2.98%). In turn, transportations inflation was muted at 0.09%. From the previous month, the new consumer price index was at 0.35%.

The consumer price inflation rate in India rose to 1.33% in December of 2025 from 0.71% in the earlier month, extending the normalization from the record low of 0.25% in October but below the market consensus of 1.5%. Despite the second consecutive increase, the inflation rate remained sharply below the Reserve Bank of India's tolerance limit of 2%-6%. Prices fell less for food (-2.71% vs -3.91% in November), which represent nearly half of the Indian consumer basket. In turn, inflation eased for housing (2.86% vs 2.95%) and fuel and light (1.97% vs 2.32%). From the previous month, the Indian CPI was 0.05% higher to end the year.

India’s consumer price inflation picked up to 0.71% year-on-year in November 2025, rising from October’s record low of 0.25% and broadly matching the market consensus of 0.7%. Despite the uptick, inflation remained below the Reserve Bank of India’s lower tolerance threshold of 2% for the third straight month, as food prices continued to decline (-3.91% vs. -5.02% in October), driven by softer costs for vegetables, pulses, and spices. Goods inflation also remained subdued following September’s GST rate rationalization. Price pressures eased further in categories such as clothing and footwear (1.49% vs. 1.70%) and miscellaneous goods and services (5.64% vs. 5.71%), while housing inflation was virtually unchanged (2.95% vs. 2.96%). Meanwhile, some categories saw modest acceleration, including pan, tobacco and intoxicants (2.96% vs. 2.87%) and fuel and light (2.32% vs. 1.98%).