Inflation refers to the sustained rise in the general price level of goods and services in an economy, reducing the purchasing power of money. In India, inflation is measured mainly through the Consumer Price Index (CPI) and Wholesale Price Index (WPI).

Inflation in India

Introduction

Inflation is one of the most important macroeconomic indicators. It reflects how fast prices are rising and directly affects the cost of living, savings, and investment. In India, inflation is tracked through two major indices:

• Consumer Price Index (CPI) – measures retail inflation experienced by households.
• Wholesale Price Index (WPI) – measures price changes at the wholesale level.

⚖️ Current Trends (2025)

• Wholesale Inflation (WPI): India’s WPI inflation stayed in the negative zone at -0.32% in November 2025, compared to -1.21% in October and 2.16% in November last year.
• Retail Inflation (CPI): CPI inflation was 0.71% in November 2025, slightly higher than 0.25% in October, but still below the Reserve Bank of India’s lower tolerance band of 2%.
• Food Inflation: Food prices remained in negative territory (-3.91%), marking the sixth consecutive month of decline.
• RBI Projection: The Reserve Bank recently lowered its inflation projection for FY2025 to 2% from 2.6%, citing rapid disinflation.

📚 Causes of Inflation

1. Demand-Pull Inflation – When demand exceeds supply, prices rise.
2. Cost-Push Inflation – Rising input costs (wages, raw materials, fuel) push prices upward.
3. Imported Inflation – Global price increases (oil, metals) affect domestic costs.
4. Structural Factors – Supply chain inefficiencies, agricultural dependence, and policy changes.

🏛️ Types of Inflation

• Creeping Inflation: Mild, less than 3% annually.
• Walking Inflation: Moderate, 3–10% annually.
• Galloping Inflation: Severe, above 10%.
• Hyperinflation: Extremely high, often above 50% per month.

🔍 Impact of Inflation

• On Consumers: Reduces purchasing power, affects savings.
• On Businesses: Raises production costs, may reduce competitiveness.
• On Economy: Moderate inflation encourages investment, but high inflation destabilizes growth.
• On Government Policy: Influences RBI’s monetary policy (repo rate, CRR).

✅ Conclusion

Inflation is a double-edged sword: moderate inflation supports growth, but excessive inflation erodes economic stability. India’s current scenario (late 2025) shows subdued inflationary pressures, with WPI in negative territory and CPI below RBI’s tolerance band. This reflects easing food and commodity prices, though policymakers must remain vigilant to balance growth and price stability.