One Quick Look: Unpacking Nov CPI – misleading core inflation, weak demand, food pressures

However, these are price changes compared to the same month last year. When compared to October, food prices were 0.5 per cent higher in November. Daily price data for December also shows a further rise in prices on a month-on-month basis. This is what matters to households, who don’t really care so much about the year-on-year inflation rate but how prices are evolving from one day, week, and month to another. And if prices of key food items such as vegetables are up – as they were in November, 2.6 per cent higher from October – then even a record low inflation number stops making sense.

Then there is core inflation, or inflation excluding items whose prices are volatile, such as food and fuel. This measure of inflation is important because it is seen as a sign of underlying price pressures in the economy; people will buy food and fuel to an extent irrespective of their prices because they are required for survival – food for nourishment and fuel for mobility.

As such, inflation excluding food and fuel tells us how prices are moving when we consider only those items whose demand is impacted by changes in prices. And this is where things get interesting, for core inflation has been broadly inching up in 2025, standing around 4.4 per cent in November. This suggests rising demand, which is good. Except, there is a huge problem here.

This ‘simple’ core inflation includes some fuel items as well as two items that recorded all-time high inflation rates of more than 50 per cent each in November: gold and silver. The two – as well as petrol and diesel – together make up around 3.5 per cent of the entire CPI basket. And if their prices rise or fall sharply, it can completely distort the overall picture. For instance, if gold and silver are excluded from the CPI, headline retail inflation would have been (-)0.19 per cent in November, according to The Indian Express’ calculations.

Removing gold, silver, petrol, and diesel from core inflation gives us what economists call ‘core-core’ or ‘super core’ inflation. And calculations show this measure of inflation fell to a new record low of 2.4 per cent in November, indicating price pressures are very weak. This may be for a variety of reasons, including the September 22 Goods and Services Tax cuts, some weakness in demand, and some statistical issues with how the statistics ministry compiles CPI data.