Households experience relief as price pressures ease

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Indian households are beginning to see relief from persistent inflation, according to the RBI’s September 2025 Inflation Expectations Survey of Households (IESH). The survey, covering 6,082 respondents across 19 cities, showed slower expected-price-rises in food, non-food products, housing, and services, though current inflation perception edged up slightly to 7.4%. Short-term and one-year inflation expectations fell to 8.1% and 8.7%, respectively. Younger respondents (up to 25 years) perceived lower inflation, while among cities, Kolkata reported the highest perception of current inflation.

Indian households are beginning to experience respite from ongoing inflation. In the latest round of the Reserve Bank of India’s (RBI) bi-monthly Inflation Expectations Survey of Households (IESH), respondents reported an overall easing of price and inflationary pressures.

The September 2025 survey indicated a slowdown in expected price rises across key product categories, even as the perception of current inflation edged up slightly. This easing was noticeable across major sectors:

Food and non-food products: Households anticipated slower price increases compared with previous survey rounds.
Housing and services: Respondents reported reduced pressures, indicating a stabilization in rents and service costs.

Conducted between August 28 and September 06 across 19 major cities, the survey gathered 6,082 responses. Although easing has been observed, households’ inflation expectations are still above the RBI’s medium-term target 4%.

Inflation perceptions and expectations

The findings of the survey revealed that the median perception of current inflation increased marginally by 20 basis points to 7.4% compared with the previous round. However, near-term inflation expectations recorded a decline. Inflation expectations for the next three months fell by 20 basis points to 8.1%, while one-year ahead expectations dropped by 30 basis points to 8.7%.

At both horizons, the share of households anticipating higher prices and inflation was lower than in the earlier round.

Product-wise, 77.8% of households anticipated a price rise in the coming three months, compared with 79.5% in the earlier survey. Over a one-year horizon, 86.8% expected higher prices, slightly lower than 88.1% previously.

Differences also emerged across age groups. Respondents up to 25 years reported the lowest current perception of inflation at 7.0%, while households above 60 years reflected a higher level at 7.9%.

City-wise, Kolkata registered the highest perception of current inflation at 10.5%, followed by Mumbai at 8.5% and Delhi at 8.0%.

The RBI emphasized that the survey results offer directional insights into household views on inflation based on their consumption patterns but do not necessarily reflect the central bank’s own assessment of inflation trends. Still, the downward trend in household inflation expectations could provide comfort to the Monetary Policy Committee (MPC), which has held interest rates steady in recent sessions while balancing inflation management with growth. Economists suggest that if these expectations continue to ease, the RBI may have more scope to maintain its pause-and-watch approach or potentially consider a rate cut in the near future.

A snapshot of inflation trends in August

India’s consumer price inflation rose to 2.07% in August 2025, compared with a revised 1.61% in July, largely in line with market expectations. This was the first monthly uptick in inflation in ten months, though it remained close to the Reserve Bank of India’s lower tolerance limit of 2% under its inflation-targeting framework.

Food prices, which account for nearly half of the CPI basket, declined by 0.69%, easing from a sharper 1.76% fall in July. Inflation picked up for pan, tobacco and intoxicants (2.49% versus 2.45%) as well as for miscellaneous items (5.05% versus 5.01%). In contrast, price increases slowed for clothing and footwear (2.33% versus 2.50%), housing (3.09% versus 3.17%), and fuel and light (2.43% versus 2.67%).

In India, the largest component of the Consumer Price Index (CPI) is food and beverages, which accounts for 45.86% of the total weight. Within this, cereals and products hold 9.67%, milk and products 6.61%, vegetables 6.04%, prepared meals, snacks and sweets 5.55%, meat and fish 3.61%, and oils and fats 3.56%.

The miscellaneous category makes up 28.32%, with major contributors including transport and communication (8.59%), health (5.89 %), and education (4.46%). Housing has a weight of 10.07%, followed by fuel and light at 6.84%, clothing and footwear at 6.53%, and pan, tobacco, and intoxicants at 2.38%.

Consumer price movements in India tend to be highly volatile due to several factors. These include heavy dependence on energy imports, the unpredictable effect of monsoon rains on its large agricultural sector, challenges in transporting food products owing to inadequate road and infrastructure facilities, and the pressure of a high fiscal deficit. In 2013, the Consumer Price Index officially replaced the Wholesale Price Index (WPI) as the primary gauge of inflation in the country.

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FAQs

What is the RBI’s Inflation Expectations Survey of Households (IESH)?
The IESH is a bi-monthly survey conducted by the Reserve Bank of India to gauge households’ perceptions and expectations of inflation across key product categories. It provides directional insights but does not reflect the RBI’s official assessment of inflation.
What were the key findings of the September 2025 survey?
Households reported an overall easing of price and inflationary pressures. Expected price rises slowed across food, non-food products, housing, and services, although current inflation perception edged up slightly.
How many households participated in the survey?
The survey covered 6,082 respondents across 19 major cities.
What were the current and expected inflation rates?

Median perception of current inflation: 7.4% (up 20 basis points)
Three-month expectation: 8.1% (down 20 basis points)
One-year expectation: 8.7% (down 30 basis points)