India's retail inflation staying negative for another 2 months: SBI
What's the story
India's retail inflation, excluding gold, is expected to remain in the negative for two more months. The prediction comes from a report by SBI Research and highlights an unusual low-inflation environment in the country. In October, India's Consumer Price Index (CPI) inflation fell to a record low of 0.25% year-on-year (YoY), mainly due to falling food and beverage prices.
Policy dilemma
Policy challenge amid low inflation and strong GDP growth
The negative inflation trend, along with a Q2 FY26 GDP growth of over 7%, presents a major policy challenge for the Reserve Bank of India (RBI). The central bank will have to strike a fine balance between supporting economic growth and maintaining price stability. SBI Research's report emphasized that upcoming data such as November-December inflation figures, Q3 GDP, and new CPI-GDP series will influence future policy decisions.
Rate strategy
October decision and future rate action
The report also noted that the RBI's decision to keep rates unchanged in October has limited its flexibility. Any future rate action, including a possible cut in December, will have to be communicated carefully considering the strong growth and low inflation. The study emphasized that liquidity management and calibrated credit supply will be crucial for smooth transmission as credit demand is expected to outpace deposit growth.