India's Inflation Rises to 0.71% in November 2025

Introduction to November's Economic Data

India's consumer price inflation saw a modest increase to 0.71% year-on-year in November 2025, up from a historic low of 0.25% recorded in October. This figure aligned closely with market expectations of 0.7%. Despite the uptick, the inflation rate remained below the Reserve Bank of India's (RBI) lower tolerance limit of 2% for the third consecutive month. The data, released by the Ministry of Statistics and Programme Implementation (MOSPI), highlights a complex economic picture where strong growth coexists with subdued price pressures, largely influenced by declining food costs.

A Detailed Look at Inflation Components

The primary factor keeping headline inflation in check was the continued contraction in food prices. Food inflation stood at -3.91% in November, a slight improvement from -5.02% in October. This trend was driven by softer prices for essential items such as vegetables, pulses, and spices. The moderation in goods inflation was also supported by the GST rate rationalization implemented in September. Price pressures eased in several other categories, including clothing and footwear, which saw inflation at 1.49% compared to 1.70% in the previous month. Miscellaneous goods and services also saw a slight dip to 5.64% from 5.71%. Housing inflation remained stable at 2.95%.

However, not all categories experienced a slowdown. Some sectors saw a modest acceleration in price growth. Inflation for 'pan, tobacco and intoxicants' rose to 2.96% from 2.87%, while the 'fuel and light' category saw inflation increase to 2.32% from 1.98% in October.

The 'Goldilocks' Scenario: High Growth, Low Inflation

The current economic environment has been described as a 'Goldilocks period'—a rare phase of strong, sustainable growth combined with low inflation. This situation is favorable for both policymakers and investors. The Indian economy expanded by a robust 8% in the first half of fiscal year 2025-26, with Q2 growth hitting an impressive 8.2%, the fastest in six quarters. This strong performance prompted the RBI to revise its GDP growth projection for the full fiscal year upwards to 7.3% from an earlier estimate of 6.8%.

This unique combination of high growth and low inflation has provided the RBI with the necessary room to support economic activity. The Monetary Policy Committee (MPC) recently reduced the repo rate by 25 basis points, bringing it down to 5.25%. This move was complemented by liquidity-easing measures, including Open Market Operation (OMO) purchases and a USD-INR buy-sell swap, to ensure the rate cut translates into lower borrowing costs for consumers and businesses.

Navigating Domestic Strengths and Global Headwinds

Domestic demand remains the primary engine of India's economic momentum. This has been fueled by several factors, including income tax rebates that increased disposable income and GST rationalization that made goods cheaper. Festive season spending further boosted consumption. However, the external sector presents significant challenges. Merchandise exports declined sharply in October due to subdued global demand, geopolitical tensions, and ongoing trade tariff issues. This has impacted the manufacturing sector, where capacity utilization for the July-September quarter stood at 73.2%, down from 77.5% in the January-March quarter.

To sustain the growth trajectory and move towards the $5 trillion economy goal, authorities are focusing on structural reforms. The government has announced a new labour code aimed at simplifying compliance for businesses while protecting workers' rights. Financial regulators like the RBI and SEBI are also working to dismantle restrictive regulations and simplify capital market investments, improving the overall 'ease ofdoing business' environment.

Market Impact and Future Outlook

The current macroeconomic stability, characterized by controlled inflation and strong growth, has boosted investor confidence. Financial conditions remain favorable, with strong credit flow to the commercial sector. The RBI's supportive monetary policy is expected to sustain this momentum. However, policymakers remain watchful. The central bank has acknowledged the risk of lenders making 'adverse choices' in a low-interest-rate regime, potentially leading to a rise in riskier assets. The implementation of the new ECL (Expected Credit Loss) framework from April 2026 is expected to act as a deterrent against such practices.

Looking ahead, the Indian economy appears resilient. While global uncertainties will continue to weigh on exports, robust domestic demand and a conducive policy environment provide a strong foundation for growth. The key challenge will be to translate available financial resources into productive capacity across all sectors, ensuring that the current momentum is sustained over the long term. Analysts project inflation to trend around 3.80% in 2026 and 4.00% in 2027, staying within the RBI's target range.