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GST: According to a Crisil research, the Reserve Bank of India (RBI) will continue to rely on data on future rate decisions, particularly in light of the uncertain global environment, and the consumer price index (CPI) inflation rate is expected to average 2.5% this fiscal year (FY26).

Due to a pick-up in fuel and light inflation and a slower rate of deflation in the food and beverage category, CPI-based inflation accelerated to 0.7% in November from 0.3% in October.

A better gauge of demand-side pricing pressures and the effect of the rationalization of the goods and services tax (GST), core inflation excluding gold, decreased little in November as well (from 2.6% to 2.5%).

According to the study, it benefited from the ongoing pass-through of reduced GST rates on mass-consumed items.

However, core inflation remained stable at 4.3% despite the spike in gold inflation (58.5 percent vs 57.8 percent).

Although the food and beverage sector saw deflation for the third consecutive month, the rate of moderation decreased. This was especially true in the food index, where deflation decreased from -5.0 percent to -3.9 percent as a result of vegetables and pulses seeing slower deflation as the base impact wears off.

Nonetheless, the survey noted that prepared meals, snacks, and sweets, as well as non-alcoholic drinks, benefited from the lower GST rates.

The paper claims that since the expenditure shares of food, gasoline, and basic categories vary by income category, the impact of inflation varies as well.

For families with lesser incomes, necessities like food and gasoline make up a larger portion of the consumption basket.

According to the study, “the rural poor, who have the largest share of food in their consumption baskets, saw the lowest inflation rate in November since the food category remained in deflation.”

The headline CPI is expected to modestly increase as the base impact on food wanes. It said, “GST rate cuts will support core inflation, while weak global crude prices should continue to anchor fuel inflation.”