Inflation Isn’t Going Back: The Reality of Inflation in India

Your monthly grocery bill keeps going up, even though every news channel keeps saying inflation in India is “cooling down.”

Don’t worry. You’re not going crazy. The headlines might be celebrating lower inflation numbers, but your actual spending tells a completely different story.

What’s really going on is bigger than just a temporary price spike that’ll go away soon. We might actually be walking into a whole new world where higher prices are just… normal. And honestly, every Indian family and business owner needs to wrap their heads around this shift.

We’re going to dig into what’s actually happening with inflation in India and globally. We’ll look at the real numbers, figure out why the experts are saying one thing while you’re experiencing something totally different, and most importantly, what all of this means for your wallet going forward.

Before we begin, if the concept of inflation isn’t very clear yet, take a quick look at this module, which can make the rest of the discussion easier to follow – INFLATION

A Historical View of Inflation

For a really long time, the world had it pretty good with stable, low inflation.

Between the 1990s and 2020, most developed countries managed to keep inflation hovering around 2-3% every year. In India, we slowly pulled ourselves out of the crazy double-digit inflation mess of the 1970s-90s and got it down to something more bearable around 4-6%.

And then 2020 happened. COVID-19 didn’t just mess up our daily lives; it completely rewired how the global economy works. 

Supply chains fell apart. Governments started pumping insane amounts of money into their economies. Then the Russia-Ukraine war kicked off, and energy and food prices went through the roof.

India’s journey through all this has been wild:

• October 2024: Inflation crossed 6%. That’s beyond what the RBI considers acceptable.
• October 2025: It crashed to just 0.25%, which is the lowest we’ve seen since they started tracking it this way in 2013.
• All of this happened in just 12 months.

But wait, there’s a twist. While the official numbers hit record lows, surveys showed that regular people think inflation in India is actually around 7.4% right now and expect it to climb to 8.7%. This huge gap between what the data says and what people are experiencing? That’s telling us something important is brewing under the surface.

Why Inflation May Have Permanently Shifted Upwards

Think about the global economy like this massive ship that’s been sailing smoothly for years. Now, though, some big fundamental changes are pushing it in a totally different direction and probably permanently.

Global Trade Is Getting Complicated

The world is actually becoming less connected, not more.

Trade wars, countries picking sides, and this whole “friend-shoring” thing (where countries move production to politically friendly nations) are making everything cost more. When your phone or shoes have to take a longer route to get to you, or they’re made somewhere more expensive, guess who ends up paying for it? Yep, you do. Even a Federal Reserve official warned recently that all this fragmentation could bring back serious inflation pressure worldwide.

Three Stubborn Categories: Services, Energy, and Food

Not every price increase is the same. While your laptop or TV might stay stable or even get cheaper, three categories just won’t budge:

Services like haircuts, doctor visits, school fees, and rent, these need people to do them. When wages go up (which is good!), these costs go up too. Look at India, housing costs went up 3%, healthcare 3.9%, education 3.5%, compared to last year, even when overall inflation was basically zero.

Energy is all over the place. Climate change, wars, and the whole shift to renewable energy all make prices unpredictable. And since India imports about 85% of our crude oil, we’re basically at the mercy of whatever’s happening globally.

Food is where we Indians really feel it, since nearly half of what we spend goes on food. Sure, we had amazing rains in 2025 and got great harvests, but one bad season and boom, prices will shoot up again.

Labor and Wage Dynamics

In lots of countries right now, there aren’t enough workers for all the jobs available. This gives workers more power to ask for higher pay. Great for them, obviously, but it creates this cycle: higher wages mean businesses spend more, so they raise prices, which makes workers ask for even higher wages.

India’s a bit different. We’ve got tons of young people ready to work, but as the economy gets more organized and labor laws get stronger, what people get paid will probably go up. Socially? Fantastic. But it does push inflation up.

The Numbers Tell an Interesting Story

What’s Happening Globally

The IMF is predicting global inflation will be 4.2% in 2025, then ease down to 3.7% in 2026.

GDP growth? Pretty modest at around 3%.

These numbers aren’t alarming, but inflation in India is clearly not going back to the ultra-low levels we saw during the 2010s.

India’s Inflation Puzzle

Inflation in India for October 2025 looks impressive at 0.25%, but the picture changes once you dig deeper into the numbers.

Here’s what pushed it down:

• Food got cheaper: Vegetables that cost 30% more in 2024? They became 27.6% cheaper. Overall, food prices dropped 5.02%
• GST cuts: The government slashed taxes on clothes, shoes, and household stuff.
• Base effect: Since October 2024 had crazy high inflation in India, comparing to that makes the current numbers look way better.

But here’s the reality check:

• Take gold out of the equation (it jumped 58%), and core inflation was basically zero
• People still think inflation in India is 7-8%, though
• Services are still going up 3-4%
• India’s 10-year government bonds are yielding around 6.5% while inflation is near zero, that’s a real return of over 6%, which basically means markets don’t buy that this low inflation is sticking around.

Why the Perception Gap?

So why do people feel like inflation in India is high when the numbers say it’s low?

Older folks remember when inflation in India was brutal, so they naturally expect higher prices. The media makes a big deal when tomatoes get expensive, but barely mentions when they get cheap again. And we all notice when essentials spike, but forget when they come back down.

This perception matters a lot because it becomes self-fulfilling. If everyone expects high inflation, they ask for higher salaries and accept higher prices, which actually creates the inflation they were worried about.

Impact of Inflation on Everyday Life and the Economy

For Households

The recent low inflation in India has genuinely helped people, especially lower-income families who spend most of their money on food.

Food got cheaper, sure, but services didn’t. Still paying rent? School fees? Medical bills? You’re probably still struggling. And food prices can flip on a dime, one bad monsoon, and we’re back to square one.

Right now, with real interest rates being so high, borrowing money for a house or business is expensive. Your savings grow faster though. But this whole situation discourages investment and growth.

For Businesses

India’s got some of the highest real interest rates in the world right now. When it costs this much to borrow money, businesses hesitate before expanding.

Sanjeev Sanyal pointed out something interesting: if bond yields dropped to match our low inflation (like they have in other countries), businesses could save about 2% in financing costs across the entire economy. That could unlock some serious investment.

The steel situation shows you how global stuff mixes with local factors to create these complicated patterns that eventually affect construction, housing, and what you pay for everything.

How Central Banks and Governments are Responding

The RBI’s job is pretty clear: keep inflation in India at 4% on average, somewhere between 2-6%. Since it’s been below target for nine months straight, technically, they’ve got room to cut interest rates and boost growth.

Why the RBI might cut rates:

• Real interest rates are crazy high right now, making money unnecessarily expensive.
• The economy could use some support.
• Inflation in India is way below the 4% target.

Why the RBI is being careful: The central bank is hesitating even with these low inflation numbers, thanks to temporary stuff, good harvests, tax cuts, not real structural fixes. More importantly, people still expect inflation in India to be around 7-8%, which creates this dangerous gap.

What the government is doing: Beyond what the RBI’s up to, the government’s taken some direct action on inflation in India.

They allowed duty-free imports of pulses and cooking oils to bring food prices down. Opened up onion reserves before the festive season so prices wouldn’t spike. The GST cuts on clothes, shoes, and household items gave people immediate relief. And their massive infrastructure spending, pouring money into highways, railways, metros, and housing through PMAY, keeps demand strong for steel and cement while creating jobs.

What to Expect from Inflation in India and Globally

Let’s be real about what’s coming:

Globally (2025-2030):

• The inflation numbers will look better on paper, but services, food, and energy? They’re staying stubborn
• Supply chains will get reorganized, but it’ll cost more
• Rich countries will settle at 3-4% (higher than the 2% they got used to)
• Developing countries will keep facing volatility and sudden shocks

India (Next 1-3 Years):

Food inflation probably ticks back up once these base effects wear off.

Core inflation stays in the 3-4% range.

RBI probably cuts rates by 25-50 basis points by mid-2026.

Average inflation in India settles around 4-5% higher than these recent lows, but manageable.

Where India ends up depends on a bunch of things, such as how well we do with domestic manufacturing, whether we can improve agricultural productivity, the energy transition, and keeping fiscal discipline.

Best case? We get stable 4% inflation in India with 7-8% growth. That would be sweet. Challenging case? We bounce between 3-6% with prices spiking periodically.

The Bottom Line

So, is inflation in India going back to how it used to be? Probably not.

We’re going through a fundamental change in how the global economy works and how prices behave.

For India specifically, the picture’s mixed but not terrible. We’ve got strong growth going, infrastructure’s improving, and our policy institutions are pretty competent. But we’re still vulnerable when food prices go crazy, we’re dependent on energy imports, and global shocks can hit us hard.

Don’t just try to survive this new inflation era; adapt and do well in it. Keep yourself informed about the big economic trends. Build skills that robots and AI can’t replace. Don’t rely on just one source of income. Think carefully about what you’re spending money on. Stay flexible.

Yeah, this transition’s messy. But it’s also creating opportunities. Clean energy means new jobs. Supply chains getting redesigned means more resilient local economies. New technologies open up possibilities we haven’t even thought of yet.

The future’s not arriving slowly or politely; it’s coming with a purpose. So the real question is: are you going to be ready for it?

Also Read: How does Government Spending Affect the Economy

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