India has succeeded in bringing inflation under control, with easing price pressures now extending to rural areas as well, according to the Economic Survey 2025–26, tabled in Parliament by Union Finance Minister Nirmala Sitharaman. The survey describes inflation as “tamed and anchored”, while cautioning that continued vigilance remains essential.
Globally, inflation has moderated sharply from post-pandemic highs. Headline inflation worldwide declined from about 8.7 per cent in 2022 to around 4.2 per cent by 2025. This easing across advanced and emerging economies provided a favourable backdrop for India’s disinflation process.
Against this context, India recorded one of the steepest declines in headline inflation among major emerging markets. Retail inflation fell to around 1.7 per cent during April–December 2025–26, the lowest level in the current Consumer Price Index series. The survey notes that the decline was “broad-based and largely supply-driven”, led mainly by easing food prices.
A key shift highlighted this year is the behaviour of rural inflation. Unlike in 2023 and 2024, when rural inflation consistently remained above urban inflation, it declined and stayed below urban inflation in 2025, reducing rural stress. The survey explains that rural inflation is typically more sensitive to food prices due to higher food consumption weights. As food inflation eased, inflation declined across both rural and urban areas, with a sharper fall in rural regions.
Food prices were the primary driver of the overall moderation. Prices of vegetables, pulses and spices entered deflation for extended periods. Wholesale inflation also remained subdued. Core inflation showed some firmness, but the survey points out that this was influenced largely by high prices of precious metals such as gold and silver. Excluding these, underlying inflationary pressures were significantly weaker.
At the state level, inflation broadly mirrored the national trend. During 2025–26, inflation declined across almost all states, remaining within or below the Reserve Bank of India’s 2–6 per cent tolerance band, except in Kerala and Lakshadweep, where retail inflation breached 6 per cent. The survey notes that deviations in state inflation are driven more by local relative-price movements than by persistent inflation.
An analysis of state-wise data from 2014 to 2025 shows that some states, particularly in the South and Northeast, tended to record inflation above the national average, while states such as Delhi and Himachal Pradesh were often below it. The survey finds a positive association between state-level inflation and wage rates, state GDP growth, and Covid impact, while a higher share of industrial output helped dampen inflation through supply-side efficiencies. It also notes that GST was price-neutral for state-level inflation differences.