Retail inflation inches up to 0.71% in November as food deflation narrows

India’s retail inflation inched up to 0.71% in November from a record low of 0.25% in October due to narrowing food deflation and the fading impact of a favourable base effect. While headline inflation increased, core inflation, which excludes food and fuel groups, eased marginally to 4.23% from 4.33%, reflecting the impact of cuts in the goods and services tax (GST).

The latest print is marginally lower than the 0.8% projection in a recent Mint poll of economists. It marks the fourth instance in five months that headline inflation has stayed below the lower bound of the Reserve Bank of India’s 2-6% target band.

Deflation in the food category narrowed to 3.91% in November from 5.02% in October, the government said on Friday. This was largely driven by higher inflation in eggs, which increased sharply to 3.77% from 1.33%.

Along with this, smaller deflation in both vegetables and pulses—the key drivers behind low inflation—compared to the previous month also contributed to the rise. Vegetable inflation was -22.20% in November, up from -27.57%, while pulses and products inflation was -15.86%, up from -16.15%.

Food inflation, which has remained in negative territory since June this year and accounts for almost 40% of the Consumer Price Index basket, remains the key driver of the ultra-low inflationary trend.

“Looking ahead, the year-on-year prints for most food items have hardened during 1-11 December 2025 vis-à-vis November 2025, even as a fairly large number of these remained in the deflationary zone,” said Aditi Nayar, chief economist at Icra.

According to economists, a continued normalization in base and increasing prices of some vegetables may push inflation further up in the next month. But the print is likely to remain benign.

Inflation for October-November, at an average of 0.48%, is currently marginally below the 0.6% projected for Q3 by the central bank. The continued softer inflation print is likely to keep the doors open for further rate cuts, but economists are divided over the timing.

In its monetary policy meeting on 5 December, the RBI delivered a 25-basis-point rate cut, extending the cumulative easing since February to 125 bps. The central bank has signalled comfort with the current inflation trajectory, while it raised its growth forecast for the full year to 7.3% from 6.8%.

“The evolving inflation-growth outlook, as well as the fiscal policy measures unveiled by the next Union Budget, will guide the MPC's next decision. Our base case suggests a pause in the MPC's February 2026 policy review,” added Nayar.