Both retail and wholesale price indices softened through the year, shifting policy attention from inflation management to growth support. This creates a distinctly different backdrop for Finance Minister Nirmala Sitharaman as she prepares to present the Union Budget.
India entered FY26 with inflation still elevated from previous supply shocks. Through the first half of the financial year, price pressures continued to cool month after month. By mid-year, retail inflation settled comfortably within the RBI’s tolerance band and continued sliding, supported by easing food and fuel prices.
Wholesale inflation went further, turning negative as global commodity corrections translated to lower input and producer prices. The disinflation wave strengthened the case for monetary easing and renewed the debate on how to balance growth priorities with price stability.
India’s inflation YoY breakdown
Retail inflation recorded some of the lowest readings in recent years. The RBI started FY26 with a CPI inflation projection of 4.2% and revised it downward multiple times as price prints softened.
The latest projection pegs FY26 inflation at 2.6%, signalling confidence that headline inflation is stabilising near the medium-term target.
Month-on-month, CPI displayed a notable downward path, slipping from mid-year levels to one of the lowest readings in October. At the wholesale level, the decline was even sharper. WPI touched negative territory by October, around –1.2%, reflecting reduced input costs for manufacturers and cooling global commodity prices.
What drove inflation: Food, fuel, core and services
India’s inflation trend in FY26 so far has shown a visible cooling in both retail and wholesale price indicators, with the sharpest easing recorded in October 2025. Retail inflation based on CPI fell to 0.25% year-on-year in October, from 1.44% in September, marking its lowest level since the current CPI series began.
On the wholesale side, WPI inflation continued a deflationary streak led by declines across food, crude petroleum and natural gas, electricity, mineral oils, and basic metals.
The most pronounced driver of disinflation was the WPI Food Index, which dropped –5.04% year-on-year in October, extending the –1.99% reading in September, pointing to easing prices in key food categories.
While headline CPI and WPI both reflected strong moderation, data suggests that the core price basket remained comparatively stable, indicating that the recent easing has not yet translated into broad-based price cuts across services and other non-food categories.
Monetary Policy: The RBI’s stand under Sanjay Malhotra
After holding rates steady for several months, the Reserve Bank of India began easing in February 2025 with a 25-basis-point cut, followed by another 75 basis points of cumulative reductions in April and June, taking the total rate cuts in the current cycle to 100 basis points.
The June decision also marked a shift in stance from “withdrawal of accommodation” to “neutral”, signalling that inflation risks were no longer seen as predominantly upward.
Under Governor Sanjay Malhotra, the central bank underlined that inflation management remains the priority, but policy must also enable growth as long as expectations remain anchored. The MPC reiterated that inflation has moved closer to target and that policy flexibility would continue if economic conditions permit. The messaging indicates a readiness to support demand without losing sight of price stability.