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India’s retail inflation could ease further in the coming financial year as Goods and Services Tax (GST) reforms begin to show a stronger impact on consumer prices, according to a recent report by SBI Research. The study estimates that GST rate rationalisation may lower retail inflation by up to 35 basis points (bps) in 2025–26, offering some relief to households amid broader price pressures.
The observations made by SBI Research stated that the effects of GST reforms on the CPI inflation rate are already evident in the past couple of months. CPI inflation fell by 25 basis points between September and November 2025 following GST rate rationalisation, which is less than what the bank initially predicted. The earlier forecast was that inflation would be impacted by 85 bps.
As per the research, a closer look at an item-by-item level has shown that the initial cut in inflation has been limited, though SBI Research feels that the impact might be greater when the effect is considered indirectly.
The research revealed that discounts available on e-commerce platforms, which in most cases are increased because of reduced GST rates, have not been factored into inflation as yet. On a cumulative basis, the overall impact on CPI inflation can result in a cut of 35 basis points within the 2025-26 fiscal.
The report also noted variations in the inflation rate across regions. In November 2025, the inflation rate in Kerala stood at 8.27 %, with rural inflation at 9.34 % and urban inflation at 6.33 %. This rise is mainly due to increases in the prices of gold, silver, oil, and fats, which are consumed more in the state.
Despite the positive impact of GST reforms on prices, inflationary pressures may continue. SBI research warned that the weakening of the Indian Rupee may increase import prices. Reflecting this trend, the CPI inflation rate in India rose slightly to 0.71 % in November 2025 from 0.25 % in October 2025, but is forecast to rise to 2.7 % by March 2026.
Also Read: Are GST Reforms Revitalizing India's Auto Sector to Attract Investments?
SBI Research has forecast average inflation of 1.8% for 2025-26 and 3.4% for 2026-27. However, despite these projections, the report does not expect the Reserve Bank of India to change its current interest rate stance in the February monetary policy review. According to the researchers, RBI is likely to remain cautious as it balances the benefits of lower inflation against currency risks and global economic uncertainty.
