Budget 2025: A close look at India’s Inflation trends ahead of Sitharaman’s key policy moves

Finance Minister Nirmala Sitharaman’s 2025 Budget is likely to address the economic landscape, with a focus on India’s inflation, which has been a key concern for policymakers.

Budget 2025 will be the second budget to be presented by Sitharaman during her second tenure as the finance minister in the PM Modi-led central government.

The Reserve Bank of India (RBI) has been tasked with keeping the inflation levels within its tolerance band of 2-6 per cent.


The consumer price index witnessed moderation and reached within the RBI comfort zone, especially in H1. For two consecutive months, July and August, the inflation rate remained below the RBI’s target of 4%.

But in October, the rate hit a 14-month high of 6.21%, surpassing the upper end of the central bank’s target. Food prices, which make up about half of the consumer price basket, climbed 10.87% from a year earlier.

The recent inflation print for the month of January stood at 4.31 per cent on an annual basis, marking a five month low.

Former RBI Governor Shaktikanta Das emphasised the need to achieve a 4 per cent inflation target, indicating that this process should be gradual and sustainable.

At RBI’s December MPC meeting, Das said "The inflation horse made a very valiant effort to bolt, but our effort is to keep it on a tight leash."

The central bank revised its inflation forecast for FY25 to 4.8%, up from the previous estimate of 4.5%.

Das acknowledged the challenges in taming inflation, driven by volatile food prices, global geopolitical tensions, and supply-side disruptions.

Das’ analogy of the horse had succeeded the 'elephant in the room' (inflation) in the October meeting, reiterating the central bank’s goal to prevent inflation from derailing economic recovery.

As the government gears up for Budget '25, the groundwork laid by existing policies forms a critical backdrop. Whether in the realms of taxation, investment incentives, or welfare programs, these policies have far-reaching implications for the economy. The principle of continuity and strategic realignment is likely to guide budgetary decisions, ensuring a seamless transition while addressing evolving economic demands.