India has registered one of the largest reductions in inflation among major emerging economies, according to the Economic Survey 2026. The Survey described that average inflation slipped to a historic low of 1.7 per cent between April and December 2025. And this decrement in inflation was primarily because of lower food and fuel prices, which together build up more than half of the Consumer Price Index (CPI) bundle.
The Survey pointed that this disinflation has occurred alongside robust GDP growth of 8 per cent in the first half of FY26, underscoring the stability of India’s macroeconomic fundamentals and its capability to manage price pressures without compromising growth.
Across the world, inflationary pressures have moderated across advanced and newly-industrializing economies, with global headline inflation going down from 8.7 per cent in 2022 to 4.2 per cent in 2025.
Against this backdrop, India came forward for attaining a faster and deeper moderation in prices which is supported by easing commodity costs, favourable domestic supply conditions, and proactive policy interventions.
Key Highlight: Significant Drop in Food Inflation
A key highlight of the Survey was the significant drop in food inflation, which reached deflationary territory from June 2025. Prices of vegetables, pulses and key horticultural commodities such as onions, tomatoes and potatoes fell steeply, facilitated by higher production, timely trade measures and strategic buffer stock management. Core inflation remained relatively stable, with a modest uptick attributed largely to increasing prices of precious metals amid global uncertainty.
Fundamentally, the easing of inflation has also manifested as reduced rural stress.
Rural Inflation Trends and Relief for Households
The Economic Survey observed that, unlike in 2023 and 2024 when rural inflation was greater than urban inflation, rural inflation went down in 2025 and remained below urban inflation, thanks to the significant drop in food prices, which helped rural households.
Moreover, the regional data reflected that inflation stayed 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 made possible by local price movements rather than persistent inflationary pressures, the Survey noted.
Outlook for the Future
Looking ahead, not only the RBI but also the International Monetary Fund project a moderate uptick in inflation in FY27, though it is projected to remain within the target range.
The Economic Survey stays positive about the future, indicating to strong farm output, stable global prices, and careful policymaking. However, it also warns about possible risks from global uncertainties and currency movements.
