GST Cuts Trim CPI Inflation 25 bps in Sep-Nov: SBI Eyes 35 bps Total FY26 Impact

The decline in Consumer Price Index (CPI) or retail inflation due to massive GST rate rationalization has been around 25 bps so far in the September-November 2025 period, according to estimates put forth by SBI Research.
GST rationalisation has led to a reduction in CPI inflation in India.

SBI Research had earlier estimated that the impact of GST on CPI could be around 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 SBI Research report read.

"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 read.

In November 2025, Kerala's inflation stood at 8.27 per cent, with rural inflation at 9.34 per cent and urban inflation at 6.33 per cent; the sharp increase in the prices of gold, silver, and oil and fats, whose consumption is high in the state, is likely a driver.

Going forward, inflation in India is expected to rise further given the depreciation of the rupee.

SBI Research forecasts inflation for 2025-26 at 1.8 per cent and for 2026-27 at 3.4 per cent, but doesn't see any change in RBI's stance on present rates at least for the February monetary policy.

According to the SBI report, India's CPI inflation trend reversed, rising marginally to 0.71 per cent in November 2025, from 0.25 per cent in October 2025, and is expected to reach 2.7 per cent in March 2025.