India’s inflation, which had touched an unprecedented low of 0.25% in October, inched back up to 0.71% in November. Government data released on Friday showed that the cooling cycle in food and fuel prices has started to taper off, pushing consumer inflation slightly higher. The number came almost exactly in line with economists’ expectations, based on a Reuters survey.
This rise was most visible across everyday essentials. Vegetables, eggs, meat, fish, and spices all saw month-on-month price increases, while fuel and light climbed 2.32% compared to 1.98% in October. Both urban and rural inflation moved upward, indicating that the pressure was broad-based rather than confined to a single region or consumer group.
How the RBI Is Responding
Despite the uptick, India continues to operate in a low-inflation environment. In fact, the softness in price levels combined with emerging signs of economic moderation prompted the Reserve Bank of India to reduce policy rates by 25 basis points last week. The move was intended to support domestic growth, which has remained resilient but is beginning to show pockets of strain.
The RBI now projects inflation at 2% for the fiscal year ending March 2026, lower than its October forecast of 2.6%. It expects CPI inflation to average 2.9% in the current quarter and climb gradually to 4.0% by September 2026. Policymakers have described the present balance between growth and inflation as favourable enough to justify a supportive monetary stance.
RBI Governor Sanjay Malhotra echoed this view, saying the central bank will continue to respond proactively to the productive needs of the economy. Analysts remain divided, however, on whether the recent rate cut marks the end of the easing cycle or if more cuts may follow.
Exports Under Pressure as US Tariffs Bite
External conditions have added a fresh layer of complexity. In August, the United States imposed an additional 25% tariff on Indian imports—pushing duties on some categories as high as 50%. Key labour-intensive sectors such as textiles, gems and jewellery, and marine products have been hit hardest.
While goods shipped to the US account for only around 2% of India’s GDP, sustained weakness in these industries could lead to job losses and dampen overall economic momentum. October’s export figures underscored the strain: outbound shipments to the US dropped 8.5% year-on-year to $6.3 billion, marking the second consecutive monthly decline. India’s total exports also fell sharply by 11.8% in the same month.
Domestic Policy Tries to Cushion the Blow
To counter these headwinds, the government moved in late September to simplify the goods and services tax structure and lower levies on several consumer items. The timing, ahead of India’s extended festive season, helped boost demand for cars, consumer goods, and agricultural products. Higher domestic consumption provided a brief offset to the export slump but has not been enough to shield the wider economy from global trade friction.
Rupee Slides as External Pressures Build
With no breakthrough in trade talks between New Delhi and Washington, India continues to feel the pressure on its currency. The rupee has been hitting fresh record lows and recently slipped past the 90-per-dollar level. The sustained weakness reflects not only the export slowdown but also stronger dollar demand and broader global risk dynamics.
Whether India can maintain its growth trajectory will depend on how these domestic and international forces evolve over the coming months. For now, inflation remains low but rising, growth is steady but vulnerable, and policy decisions both at home and abroad—are shaping the next phase of India’s economic landscape.