India Inflation Remains Low and Stable, Policy Flexibility Intact
Jan 13, 2026
AdvisorAlpha
Summary
Low inflation persists in India, but RBI expected to hold rates despite benign price pressures.
India’s inflation remains comfortably below the Reserve Bank of India lower tolerance band of 2 percent for the fourth consecutive month, reinforcing the broader trend of price stability heading into 2025.
Core inflation excluding gold remains subdued at just 0.4 percent, pointing to limited underlying price pressures across the economy. This suggests that the recent softness in headline inflation is not driven by temporary factors alone.
From next month, a new CPI series will be introduced. While this marks an important structural update, inflation readings from the new series may not be fully comparable with the current data, warranting some caution in interpretation during the transition phase.
Policy implications: Despite benign inflation, near term repo rate cuts appear unlikely. The central bank is expected to retain flexibility, with easing more likely if growth momentum weakens.
Market impact: Low inflation is neutral to slightly positive for markets, supporting interest rates, consumption, and overall policy optionality.
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