India's Deflation Masked by Rupee, Gold Rally; RBI Cuts Rates

• Rupee weakened from 86 to 90.7 against the US dollar in five months, tripling imported goods' contribution to India's CPI to 1.6% in November 2025.
• SBI Research indicates India's retail inflation of 0.71% in November would have been -0.12% without imported gold and silver, suggesting masked deflation.
• Gold inflation surged 58% year-on-year in November, significantly impacting the 'personal care and effects' category.
• Government imposed import restrictions on silver and platinum jewellery components, extending curbs until April 30, 2026, though their impact is not yet visible.
• RBI cut interest rates twice recently, and SBI Research forecasts "lower for longer" benchmark rates with average inflation at 1.8% in FY26 and 3.4% in FY27.

Why It Matters: Gold imports mask India's deflation, potentially leading to interest rate cuts.