Retail inflation may reduce by 35 basis points in FY25-26; driven by GST reforms: Report

GST reforms could lower retail inflation by up to 35 basis points in 2025-26, with the impact already visible in recent months, according to a report by SBI Research.The report, cited by news agency ANI, estimated that Consumer Price Index (CPI) or retail inflation declined by around 25 basis points during the September–November 2025 period due to extensive GST rate adjustments. SBI Research had earlier projected that GST changes could influence CPI inflation by as much as 85 basis points.“However, item-by-item calculation now shows that the decline in CPI inflation due to GST has been around 25 basis points so far in the Sep-Nov’25 period,” the report said.

SBI Research noted that the actual impact of GST reforms on inflation could be higher, as current estimates do not fully capture discounts offered during e-commerce sales following tax reductions.“We believe that this impact does not account for the discounts on e-commerce sales, which could be higher because of GST reduction. We believe that total reduction in CPI owing to GST could be 35 bps (basis points) in 2025-26,” the report stated.At the state level, Kerala recorded a retail inflation rate of 8.27 per cent in November 2025, with rural inflation at 9.34 per cent and urban inflation at 6.33 per cent. According to the report, the higher inflation in Kerala was largely driven by rising prices of gold, silver, and oil and fats, which have a higher consumption weight in the state.The report also cautioned that the depreciation of the rupee could add to inflationary pressures going forward.Looking ahead, SBI Research expects inflation to average 1.8 per cent in 2025-26 and 3.4 per cent in 2026-27. Despite these projections, the report does not foresee any change in the Reserve Bank of India’s current interest rate stance in the February monetary policy review.At the national level, CPI inflation rose to 0.71 per cent in November 2025 from 0.25 per cent in October 2025, with SBI Research projecting inflation to reach 2.7 per cent by March 2025.