India’s inflation cheer also has a growing ‘core’ concern

CRISIL has said that while India’s headline inflation based on the Consumer Price Index (CPI) fell to 2.8 per cent in May 2025 — a good signal for the economy — a rise in core inflation could present fresh challenges.

According to CRISIL, the decline in food inflation is helping bring down the headline retail inflation figure. However, core inflation, which excludes food and fuel, is edging up. Although still below the average of the past decade, core inflation has now stayed above four per cent for four consecutive months.

CRISIL said that if this rise in core inflation continues, it could start pushing headline inflation higher.


The ratings firm said that rising core inflation typically reflects strengthening domestic demand. “But a deep dive into core inflation suggests that most of its recent rise is tied to global economic volatility rather than domestic factors.”

The report also highlighted the role of gold in shaping India’s core inflation trends. CRISIL said that gold prices respond to global rather than domestic signals. “Although gold carries a small weight in the headline CPI (1.1 per cent of the total index), inclusion of it in the core CPI inflation distorts domestic price signals.”

Gold carries a higher weight in India’s core inflation index than it does in other countries. While other major central banks also include gold in their core inflation calculations, its impact is much smaller because the weight is significantly lower.

CRISIL said India’s higher weighting for gold could be due to its larger share in domestic consumption compared to other nations. The agency said that removing gold from core inflation could help avoid misreading price signals.

(with PTI inputs)