Inflation falls, but household budgets still feel the heat

INDIA’s retail inflation has dropped to a low of 0.25% in October. It is the lowest since 2013. The government has hailed this as a big achievement, saying it shows strong control over prices and sound financial management. But for ordinary families, the story is not so simple. The fall in inflation mainly comes from lower food prices and recent GST cuts that led to a fall in prices of consumer goods. The sharp drop also reflects a base effect from high prices last year, which may not last long. While this looks impressive, many people continue to feel the pressure of high household expenses. Prices of daily items like milk, pulses and vegetables are still fluctuating, affecting family budgets. So, while the overall inflation rate has dropped, the cost of living for common man has not fallen in the same way.

For the Reserve Bank of India (RBI), this situation brings both relief and challenge. Core inflation, which excludes food and fuel, remains higher, showing that price pressures have not fully eased. With inflation so low, the RBI may consider cutting interest rates in its December meeting to encourage borrowing and spending. But the central bank also needs to be careful. For, inflation could rise again, especially if global oil prices go up or the rupee weakens further.

Meanwhile, the dip in inflation could be used to boost demand, strengthen incomes and stabilise food prices. A short period of low inflation can help revive growth if it does not lead to careless spending or poor planning. The numbers may show that prices are under control, but people’s experiences tell another story. True progress will come when the relief reaches every household, not just the government’s data sheets.