Consumer Price Index (CPI) or retail inflation has dropped by around 25 basis points in the September to November period due to the goods and services tax (GST) rate rationalisation and reforms, according to estimates by SBI Research.

Noting that the GST rate rationalisation exercise has led to a reduction in CPI inflation in India, SBI Research added that it had earlier estimated the impact could be around 85 bps. "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," as per the report.

FY26 retail inflation could fall by 35 bps due to GST reforms: SBI Research

The report said that this impact "does not account for the discounts on e-commerce sales, which could be higher because of GST reduction", but added that total reduction in CPI due to the reforms could be 35 bps for FY2025-26.

Notably, in November, Kerala's inflation stood at 8.27%, with rural inflation at 9.34% and urban inflation at 6.33%. The report noted that the sharp increase in the prices of gold, silver, and oil and fats, whose consumption is high in the state, is likely a driver.

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

"Going forward, inflation in India is expected to rise further given the depreciation of the rupee," it added, forecasting FY26 inflation at 1.8% and FY27 inflation at 3.4%. It however does not see any change in the Reserve Bank of India's (RBI)s stance on present rates at least for the February monetary policy.

GST rate cuts could lower inflation up to 60 bps: Standard Chartered

In September, Standard Chartered Global Research estimated that GST rate cuts could boost India's gross domestic production (GDP) between 0.1-0.16 percentage points (ppt) and lower inflation by 40-60 bps annually.

In its report titled 'India – A timely GST cut', Standard Chartered said that there will be limited revenue loss due to GST cut, which could "soothe fiscal worries", adding: "we still see pressure (0.15-0.20% of GDP) on the combined fiscal deficit".

It called the GST revamp "well timed" and "likely to support growth amid tariff headwinds", adding: "More importantly, the process reforms (faster registration, refunds, etc.) are likely to ease doing business, with a positive impact on medium-term growth prospects assuming implementation is as envisaged by the GST council."

In terms of the macro and market implications, the Standard Chartered report added that reduction in GST "is likely to reduce inflationary pressure and boost GDP growth over the next four quarters". It felt that while fiscal deficit could widen due to loss in revenue, "it would be premature to bake in a slippage so early in the year".

(With inputs from ANI)