India’s retail inflation is likely to see a meaningful decline on the back of GST rate rationalisation, with SBI Research estimating a reduction of up to 35 basis points (bps) in FY 2025–26.
According to the report, the Consumer Price Index (CPI) inflation has already softened by around 25 bps during the September–November 2025 period, driven by changes in GST rates across multiple categories. This indicates that the impact of GST reforms on inflation is gradually materialising.
Earlier, SBI Research had projected that GST rationalisation could potentially lower CPI inflation by nearly 85 basis points. However, a more granular, item-by-item analysis suggests that the realised impact so far stands at about 25 bps.
“Item-wise calculations now show that the decline in CPI inflation due to GST has been around 25 basis points during Sep–Nov 2025,” the SBI Research note stated.
Inflation Outlook Remains Benign
- FY26 inflation forecast: 1.8%
- FY27 inflation forecast: 3.4%
Despite the softer inflation trajectory, SBI Research does not expect any immediate change in the RBI’s policy stance, including in the upcoming February monetary policy meeting.
The findings underline how GST reforms and tax rationalisation are emerging as key structural factors supporting lower retail inflation in India, even as monetary policy is expected to remain steady in the near term.
