Despite retail inflation rising to 0.71% in November from a record low of 0.25% a month ago, economists say there is space for another interest rate cut by 25 basis points.

The logic is that inflation is still below the Reserve Bank of India’s target range for the third month in a row, with the new forecast at 2% for the current fiscal. This is also the 10th consecutive month that inflation has stayed below the RBI’s medium-term target of 4%.

Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, expects the inflation trajectory to move upward from here on but sees it as being fairly benign until 1HFY27. She believes there is space for a 25 basis point rate cut.

"Going ahead, with RBI having kept additional actions data-dependent, we see some room for a 25 bps repo rate cut. However, the rate-cutting cycle is clearly nearing the end, followed by a prolonged pause," she said.

Sakshi Gupta, principal economist at HDFC Bank, also expects a rate cut in the February policy, with inflation averaging below 3% in the remaining part of the fiscal due to the impact of GST (goods and services) rate cuts and sufficient food supply. This, according to her, should provide room for the RBI to deliver another rate cut in the February policy if growth shows signs of losing momentum post the festive season.

The RBI's MPC will meet next on February 4-6.

The November print on consumer price index-based inflation was on account of rising prices of food items and fuel.

According to data released by the National Statistics Office (NSO), deflation in food items was 3.91% in November against 5.02% in October.

The rise in headline and food inflation during November 2025 is mainly attributed to an increase in inflation of vegetables, eggs, meat and fish, spices, fuel and light, the NSO said.

Fuel and light inflation for November was 2.32% against 1.98% in October 2025.

Since February, the RBI has cut policy repo rate by 1.25% this year to bring it down to 5.25%.

The central bank lowered the inflation projection for the current fiscal to 2% from 2.6% estimated earlier. It also raised the FY26 GDP forecast to 7.3% from 6.8% earlier. In the July-September period, India posted 8.2% GDP growth and 7.8% in the preceding June quarter.

RBI Governor Sanjay Malhotra, while announcing the 25 basis point rate cut in the December policy, said the Indian economy is in a "rare Goldilocks period" marked by high growth and low inflation.