Daijiworld Media Network - New Delhi
New Delhi, Dec 15: India’s retail inflation is likely to remain comfortably contained during the third quarter of FY26, with headline Consumer Price Index (CPI) inflation expected to average around 0.4 per cent, marginally below the Reserve Bank of India’s forecast of 0.6 per cent, according to a report released by Bank of Baroda on Monday.
The bank attributed the benign inflation outlook to sustained moderation in food prices and stability in core inflation, which together have continued to ease pressure on household budgets despite a modest month-on-month uptick in certain vegetable prices.
The report highlighted that CPI inflation has stayed below the lower threshold of the RBI’s target band for the third consecutive month. Retail inflation fell sharply to 0.7 per cent in November 2025, a significant decline from 5.5 per cent recorded in the same month last year. This was achieved despite an unfavourable base effect and was lower than the bank’s own earlier projection of 0.9 per cent.
Food prices emerged as the primary driver of the cooling trend. Food inflation remained in negative territory at minus 3.9 per cent in November, even though the pace of deflation moderated slightly compared to October. Prices of vegetables and pulses witnessed steep declines, with vegetable inflation plunging to minus 22.2 per cent and pulses to minus 15.9 per cent, supported by improved output and increased arrivals in markets.
The analysis also noted that half of the ten major food categories are currently witnessing inflation below 4 per cent, reinforcing the overall disinflationary trend.
While there has been some sequential increase in food prices—particularly vegetables and eggs due to seasonal factors—the bank said these movements are unlikely to pose a serious risk. On a month-on-month basis, the consumer food price index rose by a modest 0.5 per cent in November, both on adjusted and unadjusted terms, pointing to limited seasonal pressure.
The report did flag early signs of price firming in key vegetables such as tomatoes, onions and potatoes in the first half of December, with tomato prices rising 5.5 per cent year-on-year during the first 11 days. However, on a cumulative basis, prices of these essentials remain nearly 25 per cent lower, which is expected to continue exerting downward pressure on headline inflation in the coming months.