RBI Should Pause Interest Rate Cuts to Assess Impact of Lower Inflation and New CPI Series
Retail inflation in November 2025 dropped to a near-record low of 0.7%, primarily driven by a high statistical base effect from the previous year. While the Monetary Policy Committee (MPC) recently reduced interest rates to 5.25%, experts suggest a pause in February 2026. The current Consumer Price Index (CPI) is heavily skewed, with food and beverages accounting for nearly 46% of the weightage. A new CPI series with a 2024 base year is expected in 2026-27, which will re-index consumption behavior and reduce the disproportionate impact of food prices on overall inflation data.
Key Points
- The statistical base effect from high inflation in late 2024 is currently keeping 2025 inflation figures abnormally low.
- Food and beverages currently hold a 46% weightage in the CPI, causing high volatility in inflation readings.
- The government plans to update the CPI base year from 2012 to 2024 to better reflect modern Indian consumption patterns.
- The MPC has already cut rates by 125 basis points since 2019, and further cuts require observation of fiscal policy impacts from Budget 2026.
Exam Facts
- Retail inflation in November 2025: 0.7%
- Current CPI base year: 2012 (Proposed update to 2024)
- Current Repo Rate: 5.25%
- Food weightage in current CPI: ~46%
Read it. Retain it. Recall it.
Get spaced-repetition flashcards, daily quizzes and offline access — free on Android.