Archive · 21 Nov 2025
Low Inflation: A Double-Edged Sword for India's Economy
India's prices are not rising much, which is good for savers but bad for businesses and debtors.
The Reserve Bank of India (RBI) wants prices to stay stable, but some people want them to go up a bit more.
India's retail price index was flat in October with a mere 0.25% increase over the same month last year
RBI's inflation forecast for 2025-26 is 2.6%, within its target range of 2-6%
Low inflation can hinder businesses' pricing power and government's tax inflows
It can also disadvantage debtors, including private firms and home loan holders
However, stable prices protect savings and benefit long-term investors
- Who
- The Reserve Bank of India (RBI) and the Indian economy
- What
- Experiencing low inflation
- When
- Currently, with projections for the next few years
- Where
- India
- Why
- To protect savers and facilitate long-term investment
Pro-Low Inflation
Pro-Higher Inflation
Impact on Savers
Pro-Low Inflation
Protects savings and relieves the hard-up
Pro-Higher Inflation
Does not provide relief to those struggling to make ends meet
Impact on Long-term Investments
Pro-Low Inflation
Enables reliable forecasts and reduces the cost of capital
Pro-Higher Inflation
Does not allow businesses to make price-revision gains in revenue
- Inflation Target
- 4% (with a leeway of 2 percentage points up or down)
- Inflation Forecast for 2025-26
- 2.6%
- Inflation in October 2023
- 0.25% (year-on-year)