AI image NEW DELHI: India is preparing to rejig methodology for computing CPI and revamp monetary policy mandate for targeting retail inflation in 2026 after a year of benign price situation due to subdued food cost and GST reduction.Consumer Price Index (CPI) based retail inflation remained in the Reserve Bank’s comfort zone (2-6 per cent) and is likely to stay that way in the next year also, keeping open the possibility of at least one more reduction in rates by the central bank in the coming months.Besides cooling food prices, the decision of the government to reduce GST rates on about 400 items in September helped in further improving the price situation in the country. US Consumers Facing Food Inflation as Tariffs Hit Indian Rice Imports: Exporters Body The wholesale price index (WPI), too, showed clear signs of easing of inflationary pressures through 2025. Early months recorded positive but declining WPI inflation, reflecting softening price pressures especially in food and fuel categories.By June, WPI entered deflation and the downward trend continued with negative prints in July and October.CPI, or headline inflation, started declining in November 2024, and since then it has remained in the Reserve Bank’s comfort zone (2-4 per cent) till June 2025. Thereafter, it has slipped below 2 per cent.Food inflation, which constitutes about 48 per cent of the CPI, started declining from about 6 per cent in January and entered the negative territory in June. It was at (-) 3.91 in November, according to the latest data.With inflation breaching the RBI’s lower band target of 2 per cent, the debate around the government’s mandate to the central bank to keep inflation within the target of 2-4 per cent assumes significance.The Reserve Bank has already issued a consultation paper with regards to the inflation targeting regime. The government will come out with a new framework effective April 1, 2025, with the current five years regime set to end in March.Meanwhile, the government is working on a new CPI series with base year (2024 = 100) which will witness a comprehensive revision of coverage, item basket, weights and methodology used in index compilation.The exercise being done after more than a decade is aimed at substantially improving the representativeness, reliability, accuracy, and overall quality of the inflation data. The new series will be released in February.On inflationary expectations, RBI Governor Sanjay Malhotra opined that the headline inflation is projected to be close to the 4 per cent target in H1:2026-27. Excluding precious metals, inflation is likely to be much lower, as has been the trend since the beginning of 2024.Further, good agricultural production, low food prices and exceptionally benign international commodity price outlook suggest that the CPI for the full year (2025-26) is likely to be around 2 per cent, half of what was projected at the beginning of the year.With inflation remaining in control, the Reserve Bank has cumulatively reduced the short-term benchmark lending rate (repo) by 125 basis since February 2025.”The most important aspect of inflation in 2026 will be the new index and its composition, which can drive any realistic forecasts as this should be in place in February 2026,” Bank of Baroda Chief Economist Madan Sabnavis said.”Assuming a normal monsoon, we can expect inflation to be very much under control in 2026. While the extremely low inflation numbers witnessed in 2025 will get reversed as the low base will result in higher numbers, on the whole it can be expected to be in the range of 4-4.5 per cent,” he said.This will not afford scope for any more rate cuts and hence February can be the final month when a rate call decision can be taken. Core inflation should ideally moderate as the GST impact fully plays through, Sabnavis added.ICRA Chief Economist Aditi Nayar said the divergence in the WPI and the CPI is driven by differences in the weighing pattern as well as the coverage of these indices.While the food segment has been in the deflationary zone across the wholesale and retail segments, services and non-food goods have prevented the CPI from falling in the deflationary zone, she said.”However, the presence of crude oil, higher weight for fuels, and low inflation in the wholesale manufactured segment has enabled food to pull down the WPI into the deflationary zone,” Nayar said.Commenting on the inflation scenario in the new year, Dharmakirti Joshi, Chief Economist, Crisil, said both CPI and WPI delivered a significant surprise this year, with each month recording lower-than-expected readings.In November, WPI continued in deflation territory, while CPI inflation was just 0.7 per cent. Excluding gold, CPI also registered deflation this month.”Exceptionally low inflation provided the RBI with room to cut rates, even as growth remained above trend. Looking ahead, we expect consumer inflation to rise to 5 per cent in FY27, largely due to base effects, while interest rates are likely to remain steady at 5.25 per cent. However, the transmission of the already announced rate cuts is expected to continue,” Joshi said.The Reserve Bank’s last bi-monthly monetary policy for 2025-26 is scheduled during February 4-6, 2026.End of ArticleFollow Us On Social MediaVideos“No Racial Angle”: SSP Rules Out Alleged Slurs in Angel Chakma KillingCongress’ Adhir Ranjan Chowdhury Flags Attacks on Migrant Workers to PM Modi’Will Rid Bengal Of Infiltrators’: Amit Shah Slams Mamata Banerjee’s 14-Year Rule, Sounds Poll BugleFrom Defence To Civil Skies: HAL’s Dhruv-NG Helicopter Takes Flight In India’s Aviation PushJapanese Tourist Harassed in Varanasi on Christmas, Netizens Slam ‘Mob Culture’Chicken’s Neck Threat Sparks Sharp Reply As Nagaland Minister Warns Bangladesh Radicals BoldlyBilawal Bhutto Goes On Anti-India Rant, Says ‘Modi Is Afraid Of Asim Munir’ Since Operation SindoorDonald Trump Tells Netanyahu He Stopped India-Pakistan War The 70th Time Since Op Sindoor PausedFrom First Woman PM To Fierce Rivalry: Khaleda Zia’s Three Terms That Redefined Bangladesh PoliticsBangladesh Mourns As Former Prime Minister And BNP Chief Khaleda Zia Dies At 80123PhotostoriesFrom Shrekking to the Black Cat Boyfriend: 7 dating trends of 2025 that may shape relationships in 2026 tooLeBron James’ fitness philosophy: A closer look at the NBA legend’s typical routine, diet, and non-negotiablesArena Awakenings: Bengaluru Gears Up for Global Sporting Glory (In Pictures)The only place on Earth where sand, snow and sea meet–can you guess?This drink can remove excess sugar from the body naturally; recipe insideSnow guaranteed! Top 5 destinations to visit in India this January for 2026 winter funBengaluru’s Nadaprabhu Kempegowda Layout moves closer to habitation as development work picks upGukesh: 5 things teenagers should learn from the chess championChennai’s Thirumayilai set for major connectivity boost with stacked Metro tunnels for smoother travel3 common mistakes with potatoes to avoid and easy solutions123Hot PicksIndigo flight DisruptionsPAN-Aadhaar link statusKhaleda ZiaGold rate todayIncome Tax RefundBahrain Golden Visa 2025Bank Holidays DecemberTop TrendingErika KirkTravis KelceJEE Advanced RegistrationAnjel ChakmaMumbai Bhandup Bus AccidentRobert Kraft vs Gayle Benson Net WorthMLB Trade RumorsAntonio BrownBengaluru PG BlastWWE Raw Highligths

AI image NEW DELHI: India is preparing to rejig methodology for computing CPI and revamp monetary policy mandate for targeting retail inflation in 2026 after a year of benign price situation due to subdued food cost and GST reduction.Consumer Price Index (CPI) based retail inflation remained in the Reserve Bank’s comfort zone (2-6 per cent) and is likely to stay that way in the next year also, keeping open the possibility of at least one more reduction in rates by the central bank in the coming months.Besides cooling food prices, the decision of the government to reduce GST rates on about 400 items in September helped in further improving the price situation in the country. US Consumers Facing Food Inflation as Tariffs Hit Indian Rice Imports: Exporters Body The wholesale price index (WPI), too, showed clear signs of easing of inflationary pressures through 2025. Early months recorded positive but declining WPI inflation, reflecting softening price pressures especially in food and fuel categories.By June, WPI entered deflation and the downward trend continued with negative prints in July and October.CPI, or headline inflation, started declining in November 2024, and since then it has remained in the Reserve Bank’s comfort zone (2-4 per cent) till June 2025. Thereafter, it has slipped below 2 per cent.Food inflation, which constitutes about 48 per cent of the CPI, started declining from about 6 per cent in January and entered the negative territory in June. It was at (-) 3.91 in November, according to the latest data.With inflation breaching the RBI’s lower band target of 2 per cent, the debate around the government’s mandate to the central bank to keep inflation within the target of 2-4 per cent assumes significance.The Reserve Bank has already issued a consultation paper with regards to the inflation targeting regime. The government will come out with a new framework effective April 1, 2025, with the current five years regime set to end in March.Meanwhile, the government is working on a new CPI series with base year (2024 = 100) which will witness a comprehensive revision of coverage, item basket, weights and methodology used in index compilation.The exercise being done after more than a decade is aimed at substantially improving the representativeness, reliability, accuracy, and overall quality of the inflation data. The new series will be released in February.On inflationary expectations, RBI Governor Sanjay Malhotra opined that the headline inflation is projected to be close to the 4 per cent target in H1:2026-27. Excluding precious metals, inflation is likely to be much lower, as has been the trend since the beginning of 2024.Further, good agricultural production, low food prices and exceptionally benign international commodity price outlook suggest that the CPI for the full year (2025-26) is likely to be around 2 per cent, half of what was projected at the beginning of the year.With inflation remaining in control, the Reserve Bank has cumulatively reduced the short-term benchmark lending rate (repo) by 125 basis since February 2025.”The most important aspect of inflation in 2026 will be the new index and its composition, which can drive any realistic forecasts as this should be in place in February 2026,” Bank of Baroda Chief Economist Madan Sabnavis said.”Assuming a normal monsoon, we can expect inflation to be very much under control in 2026. While the extremely low inflation numbers witnessed in 2025 will get reversed as the low base will result in higher numbers, on the whole it can be expected to be in the range of 4-4.5 per cent,” he said.This will not afford scope for any more rate cuts and hence February can be the final month when a rate call decision can be taken. Core inflation should ideally moderate as the GST impact fully plays through, Sabnavis added.ICRA Chief Economist Aditi Nayar said the divergence in the WPI and the CPI is driven by differences in the weighing pattern as well as the coverage of these indices.While the food segment has been in the deflationary zone across the wholesale and retail segments, services and non-food goods have prevented the CPI from falling in the deflationary zone, she said.”However, the presence of crude oil, higher weight for fuels, and low inflation in the wholesale manufactured segment has enabled food to pull down the WPI into the deflationary zone,” Nayar said.Commenting on the inflation scenario in the new year, Dharmakirti Joshi, Chief Economist, Crisil, said both CPI and WPI delivered a significant surprise this year, with each month recording lower-than-expected readings.In November, WPI continued in deflation territory, while CPI inflation was just 0.7 per cent. Excluding gold, CPI also registered deflation this month.”Exceptionally low inflation provided the RBI with room to cut rates, even as growth remained above trend. Looking ahead, we expect consumer inflation to rise to 5 per cent in FY27, largely due to base effects, while interest rates are likely to remain steady at 5.25 per cent. However, the transmission of the already announced rate cuts is expected to continue,” Joshi said.The Reserve Bank’s last bi-monthly monetary policy for 2025-26 is scheduled during February 4-6, 2026.End of ArticleFollow Us On Social MediaVideos“No Racial Angle”: SSP Rules Out Alleged Slurs in Angel Chakma KillingCongress’ Adhir Ranjan Chowdhury Flags Attacks on Migrant Workers to PM Modi’Will Rid Bengal Of Infiltrators’: Amit Shah Slams Mamata Banerjee’s 14-Year Rule, Sounds Poll BugleFrom Defence To Civil Skies: HAL’s Dhruv-NG Helicopter Takes Flight In India’s Aviation PushJapanese Tourist Harassed in Varanasi on Christmas, Netizens Slam ‘Mob Culture’Chicken’s Neck Threat Sparks Sharp Reply As Nagaland Minister Warns Bangladesh Radicals BoldlyBilawal Bhutto Goes On Anti-India Rant, Says ‘Modi Is Afraid Of Asim Munir’ Since Operation SindoorDonald Trump Tells Netanyahu He Stopped India-Pakistan War The 70th Time Since Op Sindoor PausedFrom First Woman PM To Fierce Rivalry: Khaleda Zia’s Three Terms That Redefined Bangladesh PoliticsBangladesh Mourns As Former Prime Minister And BNP Chief Khaleda Zia Dies At 80123PhotostoriesFrom Shrekking to the Black Cat Boyfriend: 7 dating trends of 2025 that may shape relationships in 2026 tooLeBron James’ fitness philosophy: A closer look at the NBA legend’s typical routine, diet, and non-negotiablesArena Awakenings: Bengaluru Gears Up for Global Sporting Glory (In Pictures)The only place on Earth where sand, snow and sea meet–can you guess?This drink can remove excess sugar from the body naturally; recipe insideSnow guaranteed! Top 5 destinations to visit in India this January for 2026 winter funBengaluru’s Nadaprabhu Kempegowda Layout moves closer to habitation as development work picks upGukesh: 5 things teenagers should learn from the chess championChennai’s Thirumayilai set for major connectivity boost with stacked Metro tunnels for smoother travel3 common mistakes with potatoes to avoid and easy solutions123Hot PicksIndigo flight DisruptionsPAN-Aadhaar link statusKhaleda ZiaGold rate todayIncome Tax RefundBahrain Golden Visa 2025Bank Holidays DecemberTop TrendingErika KirkTravis KelceJEE Advanced RegistrationAnjel ChakmaMumbai Bhandup Bus AccidentRobert Kraft vs Gayle Benson Net WorthMLB Trade RumorsAntonio BrownBengaluru PG BlastWWE Raw Highligths


India inflation likely to remain low in 2026, new CPI series on anvil

NEW DELHI: India is preparing to rejig methodology for computing CPI and revamp monetary policy mandate for targeting retail inflation in 2026 after a year of benign price situation due to subdued food cost and GST reduction.Consumer Price Index (CPI) based retail inflation remained in the Reserve Bank’s comfort zone (2-6 per cent) and is likely to stay that way in the next year also, keeping open the possibility of at least one more reduction in rates by the central bank in the coming months.Besides cooling food prices, the decision of the government to reduce GST rates on about 400 items in September helped in further improving the price situation in the country.

US Consumers Facing Food Inflation as Tariffs Hit Indian Rice Imports: Exporters Body

The wholesale price index (WPI), too, showed clear signs of easing of inflationary pressures through 2025. Early months recorded positive but declining WPI inflation, reflecting softening price pressures especially in food and fuel categories.By June, WPI entered deflation and the downward trend continued with negative prints in July and October.CPI, or headline inflation, started declining in November 2024, and since then it has remained in the Reserve Bank’s comfort zone (2-4 per cent) till June 2025. Thereafter, it has slipped below 2 per cent.Food inflation, which constitutes about 48 per cent of the CPI, started declining from about 6 per cent in January and entered the negative territory in June. It was at (-) 3.91 in November, according to the latest data.With inflation breaching the RBI’s lower band target of 2 per cent, the debate around the government’s mandate to the central bank to keep inflation within the target of 2-4 per cent assumes significance.The Reserve Bank has already issued a consultation paper with regards to the inflation targeting regime. The government will come out with a new framework effective April 1, 2025, with the current five years regime set to end in March.Meanwhile, the government is working on a new CPI series with base year (2024 = 100) which will witness a comprehensive revision of coverage, item basket, weights and methodology used in index compilation.The exercise being done after more than a decade is aimed at substantially improving the representativeness, reliability, accuracy, and overall quality of the inflation data. The new series will be released in February.On inflationary expectations, RBI Governor Sanjay Malhotra opined that the headline inflation is projected to be close to the 4 per cent target in H1:2026-27. Excluding precious metals, inflation is likely to be much lower, as has been the trend since the beginning of 2024.Further, good agricultural production, low food prices and exceptionally benign international commodity price outlook suggest that the CPI for the full year (2025-26) is likely to be around 2 per cent, half of what was projected at the beginning of the year.With inflation remaining in control, the Reserve Bank has cumulatively reduced the short-term benchmark lending rate (repo) by 125 basis since February 2025.“The most important aspect of inflation in 2026 will be the new index and its composition, which can drive any realistic forecasts as this should be in place in February 2026,” Bank of Baroda Chief Economist Madan Sabnavis said.“Assuming a normal monsoon, we can expect inflation to be very much under control in 2026. While the extremely low inflation numbers witnessed in 2025 will get reversed as the low base will result in higher numbers, on the whole it can be expected to be in the range of 4-4.5 per cent,” he said.This will not afford scope for any more rate cuts and hence February can be the final month when a rate call decision can be taken. Core inflation should ideally moderate as the GST impact fully plays through, Sabnavis added.ICRA Chief Economist Aditi Nayar said the divergence in the WPI and the CPI is driven by differences in the weighing pattern as well as the coverage of these indices.While the food segment has been in the deflationary zone across the wholesale and retail segments, services and non-food goods have prevented the CPI from falling in the deflationary zone, she said.“However, the presence of crude oil, higher weight for fuels, and low inflation in the wholesale manufactured segment has enabled food to pull down the WPI into the deflationary zone,” Nayar said.Commenting on the inflation scenario in the new year, Dharmakirti Joshi, Chief Economist, Crisil, said both CPI and WPI delivered a significant surprise this year, with each month recording lower-than-expected readings.In November, WPI continued in deflation territory, while CPI inflation was just 0.7 per cent. Excluding gold, CPI also registered deflation this month.“Exceptionally low inflation provided the RBI with room to cut rates, even as growth remained above trend. Looking ahead, we expect consumer inflation to rise to 5 per cent in FY27, largely due to base effects, while interest rates are likely to remain steady at 5.25 per cent. However, the transmission of the already announced rate cuts is expected to continue,” Joshi said.The Reserve Bank’s last bi-monthly monetary policy for 2025-26 is scheduled during February 4-6, 2026.



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