Inflation Lessons for RBI

• September 2025 retail inflation data, a 99-month low of 1.54%, has significant policy implications for the Reserve Bank of India (RBI).

• The average inflation rate for the first half of the fiscal year is 2.2%, within the RBI’s comfort band of 2%-6%.

• Consistently low inflation indicates that supply is comfortably outstripping demand.

• The clothing and footwear category’s inflation was at 2.3% in September 2025, and has been falling consistently for the last two years.

• China is increasingly relying on foreign demand to absorb its supply, which has not been India’s forte historically.

• The government has tried to stimulate domestic demand through income-tax and GST rate reductions, but this has led to temporary spurts in purchases.

• A sustained increase in real wages is needed, and the private sector needs to step up.

• The RBI could help by cutting interest rates in the next Monetary Policy Committee meeting in December.

• The RBI’s inaccuracy of its forecasts, which were predicted to be 4% in April, has been consistently revised to 2.6% at the latest meeting in end-September.

Inflation Lessons RBI is important topic for Civil service exam (WBCS).

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