GST Reforms Could Lower Retail Inflation by 0.35% in FY26, Says SBI Research

Goods and Services Tax (GST) reforms are making a dent in retail inflation, according to a new report from SBI Research. The report estimates that the rationalization of GST rates has already contributed to a roughly 0.25% (25 basis points) drop in the Consumer Price Index (CPI) between September and November.

SBI Research had initially projected that GST reforms could bring down CPI inflation by as much as 0.85%. That said, the reality is a bit more complicated. after a detailed item-by-item analysis, they revised their estimate, stating that the actual impact observed so far is around 0.25% for the Sep-Nov '25 period.

The report further suggests that the total impact of GST reforms could lead to a 0.35% reduction in retail inflation for the entire fiscal year 2025-26. This figure doesn't factor in potential discounts from e-commerce sales, which could be amplified by the GST reduction.

Kerala's inflation rate in November stood at 8.27%, with rural areas experiencing 9.34% and urban areas 6.33%. The report points to rising prices of gold, silver, and cooking oils—items with high consumption in the state—as likely contributing factors.

Nationally, India's CPI inflation saw a slight increase in November 2025, reaching 0.71% from 0.25% in October 2025. The report forecasts that inflation will likely hit 2.7% by March 2025 and projects FY26 inflation at 1.8%, with FY27 expectations also indicating an upward trend impacted by rupee depreciation.