India November 2025 CPI Inflation Analysis: Rise to 0.71% Amid Policy and External Factors

This analysis is based on the CNBC report [1] published on December 12, 2025, detailing India’s November 2025 CPI inflation rise to 0.71% (year-over-year) from October’s 0.25% all-time low [2]. The increase aligns with Reuters Poll estimates of 0.70% and is driven by rising prices in food (vegetables, eggs, meat/fish, spices) and fuel, indicating the earlier disinflation trend in these categories is losing steam [1]. Fuel inflation accelerated from 1.98% in October to 2.32% in November, reflecting global energy market volatility [1].

Contextualizing the inflation data, the Reserve Bank of India (RBI) implemented a 25-basis-point (bps) policy rate cut to 5.25% on December 5, 2025, amid the prolonged low inflation environment (well below the RBI’s 4% target) and weakening economic indicators [3][4]. The RBI revised its FY2026 inflation forecast downward to 2% (from 2.6%) and GDP growth projection upward to 7.3% (from 6.8%), signaling cautious optimism about policy measures’ ability to stimulate the economy [1].

External headwinds include U.S. tariff hikes (additional 25% on select Indian imports), which hurt labor-intensive sectors like textiles, leading to an 8.5% drop in U.S. exports and 11.8% overall export decline in October [1]. In response, India rationalized its GST regime in September 2025, cutting levies on consumer goods, vehicles, and farm products to spur domestic demand ahead of the festive season [1]. The rupee’s record low (below 90/dollar) on December 12, 2025, adds pressure, potentially increasing import costs for fuel and commodities [1].

1. Policy-Price Alignment
   : The RBI’s rate cut and downward inflation forecast are closely tied to the sustained low inflation environment, despite the November uptick. The 0.71% inflation rate remains well below the 4% target, supporting the easing stance [1][3][4].
2. Dual Policy Responses
   : The combination of GST cuts (domestic demand boost) and rate easing aims to offset export declines from U.S. tariffs, highlighting a coordinated approach to economic support [1][3][4].
3. Analyst Divergence
   : HSBC Research suggests further rate cuts in 2026, while ICRA believes the December cut may be the final one, reflecting uncertainty about future inflation and growth trajectories [1][5].
4. Rupee Dynamics
   : While rupee weakness could increase import inflation, it may enhance the competitiveness of Indian exports in non-U.S. markets, presenting a mixed impact [1].

• Import Inflation
  : Further rupee depreciation could raise costs for fuel and other imported commodities, potentially reversing the low inflation trend [1].
• U.S. Tariff Lingering
  : Continued trade tensions with the U.S. could exacerbate export declines, particularly in labor-intensive sectors [1].
• Food Price Volatility
  : Unforeseen seasonal factors or supply chain disruptions could lead to larger-than-expected food price increases [1].

• Domestic Demand Boost
  : GST cuts and lower interest rates are expected to support consumer spending and investment, driving economic growth [1][3][4].
• Non-U.S. Export Growth
  : Rupee weakness may make Indian exports more competitive in markets other than the U.S., diversifying export revenue sources [1].
• RBI Policy Flexibility
  : The low inflation environment provides the RBI with room to adjust policies further if growth undershoots projections [1][5].

• November 2025 CPI Inflation
  : 0.71% (YoY), up from 0.25% in October 2025 [1][2].
• RBI December 2025 Rate Cut
  : 25 bps to 5.25%, cumulative 125 bps cuts in 2025 (highest since 2019) [3][4].
• RBI FY2026 Forecasts
  : Inflation 2% (down from 2.6%), GDP growth 7.3% (up from 6.8%) [1].
• U.S. Tariff Impact
  : 11.8% overall export decline in October 2025 [1].
• Rupee Exchange Rate
  : Below 90/dollar on December 12, 2025 [1].
• GST Cuts
  : Implemented in September 2025 to boost domestic demand [1].