January 30, 2026
NEW DELHI – India has recorded one of the sharpest declines in headline inflation among major emerging economies, with domestic inflation averaging a historic low of 1.7 per cent during April–December 2025, according to the Economic Survey 2026.
The moderation in inflation has been driven largely by a broad-based decline in food and fuel prices, which together account for over half of the Consumer Price Index (CPI) basket.
The Survey noted that this disinflation has occurred alongside robust GDP growth of 8 per cent in the first half of FY26, underscoring the strength of India’s macroeconomic fundamentals and its ability to manage price pressures without compromising growth.
Globally, inflationary pressures have eased across advanced and emerging economies, with global headline inflation falling from 8.7 per cent in 2022 to 4.2 per cent in 2025.
Against this backdrop, India stood out for achieving a faster and deeper moderation in prices, supported by easing commodity costs, favourable domestic supply conditions, and proactive policy interventions.
A key highlight of the Survey was the sharp decline in food inflation, which entered deflationary territory from June 2025.
Prices of vegetables, pulses and key horticultural commodities such as onions, tomatoes and potatoes fell steeply, aided by higher production, timely trade measures and strategic buffer stock management.
Core inflation remained relatively stable, with a modest uptick attributed largely to rising prices of precious metals amid global uncertainty.
Importantly, the easing of inflation has also translated into reduced rural stress.
The Economic Survey observed that, unlike in 2023 and 2024, when rural inflation exceeded urban inflation, rural inflation declined in 2025 and remained lower than urban inflation, reflecting the sharp fall in food prices and offering relief to rural households.
Further, the state-level data showed that inflation remained within the Reserve Bank of India’s 2–6 per cent tolerance band in most states, with only Kerala and Lakshadweep breaching the upper limit. Variations across states were largely driven by local price movements rather than persistent inflationary pressures, the Survey noted.
Looking ahead, both the RBI and the International Monetary Fund project a moderate uptick in inflation in FY27, though it is expected to stay within the target range.
The Economic Survey remains optimistic, citing strong agricultural output, stable global commodity prices, and continued policy vigilance, while cautioning against risks from global uncertainties and currency fluctuations.