India has reported its lowest inflation rate since the commencement of the CPI series, with an average headline inflation of 1.7 percent from April to December 2025, as per the Economic Survey 2025-26 presented in Parliament. The survey attributes this decline in retail inflation mainly to the overall decrease in food and fuel prices, which make up over half of India’s Consumer Price Index basket. Over the last four years, retail inflation measured by CPI has consistently decreased from 6.7 percent in 2022-23.
This drop in inflation is largely due to lower food prices, supported by favorable weather conditions and increased production, boosting supply. On the other hand, core inflation, excluding volatile elements like food and fuel, has remained relatively steady with a slight increase during this period. The rise in core inflation is primarily influenced by significant price hikes in precious metals such as gold and silver, reaching record highs amid global uncertainties and strong demand for safe-haven assets.
Inflation has gradually eased in clothing, footwear, housing, and health sectors over the past two years, while showing fluctuations in transport and communication. This trend reflects reduced input costs, enhanced supply conditions, and competitive pressures in goods markets where prices adjust more frequently. India has witnessed one of the most significant drops in headline inflation among major Emerging Markets & Developing Economies in 2025, by about 1.8 percentage points, alongside a robust GDP growth of 8 percent in H1 FY 2026, highlighting the country’s strong macroeconomic fundamentals and its capacity to sustain growth while effectively managing price pressures.
Global rating agencies, while upgrading India’s sovereign rating, have recognized the effectiveness of India’s inflation management. S&P noted that the shift to inflation targeting in monetary policy has yielded positive results, with better-anchored inflation expectations compared to a decade ago. India’s inflation, which frequently hit double digits between 2008 and 2014, has averaged 5.5 percent over the past three years, remaining within the lower end of the Reserve Bank of India’s target range of 2-6 percent in recent months. These developments, coupled with a robust domestic capital market, indicate a more stable and supportive environment for monetary policies, as per the survey findings.
A global trend of declining inflation has been observed across advanced, emerging, and developing economies this year. Global headline inflation has decreased from a peak of 8.7 percent in 2022 to 4.2 percent in 2025.
