13 December 2025

• Retail inflation in India, measured by the Consumer Price Index (CPI), rose marginally to 0.7% in November 2025 from 0.25% in October 2025.
• Despite the uptick, November’s inflation remains the second-lowest ever recorded in the current CPI series.
• CPI inflation has slowed in seven out of the first eight months of FY 2025–26.
• The latest data was released by the Ministry of Statistics and Programme Implementation (MoSPI).
• A sustained contraction in food prices continued to be the primary driver of low headline inflation.

Key Points

• Food and beverages inflation contracted by 2.8% in November 2025 due to a high base of 8.2% in November 2024.
• Key vegetables—potatoes, onions, and tomatoes—saw sharp price declines.
• Food inflation fell by 3.9%, largely driven by vegetables and pulses.
• Edible oils inflation rose to 7.9%, with mustard and coconut oil as key contributors.
• Fuel and light inflation accelerated to 2.3%, up from 2% in October 2025.
• Inflation in pan, tobacco, and intoxicants increased marginally to 3%.
• Clothing and footwear inflation eased to 1.5%.  Housing inflation remained stable at around 2.95%, indicating sticky services inflation.

Static Linkages

• CPI is the primary nominal anchor for monetary policy under the inflation targeting framework.
• Food items carry the highest weight in CPI, making food prices critical for headline inflation.
• Base effect significantly influences year-on- year inflation readings.
• Agricultural supply-side dynamics directly affect price stability.
• Fuel prices influence second-round inflationary effects through transport and logistics.
• Sticky inflation in housing reflects inelastic supply and urbanisation trends.

Critical Analysis

• Pros
  • Improves real incomes and consumption.  
  • Provides policy space for RBI.
  • Reflects effective food supply management.
• Concerns
  • Heavy dependence on base effect.  
  • Rising edible oil and fuel inflation.
  • Structural issues in food storage and marketing.
  • Sticky housing inflation.

Way Forward

• Strengthen agri storage and logistics.
• Promote oilseed self-sufficiency.
• Improve real-time price monitoring.  
• Maintain balanced monetary stance.
• Address urban housing supply constraints.

INDIAN OCEAN FUELS BLUE ECONOMY

KEY HIGHLIGHTS

• India played a key role during UNCLOS negotiations by supporting the principle of the “common heritage of mankind” for seabed resources beyond national jurisdiction.
• The Indian Ocean, supporting nearly one-third of humanity, is facing severe stress from climate change, sea-level rise, ocean warming, and IUU fishing.
• Recent global milestones such as UNOC3 (Nice), COP30 (Belém, 2025) and the BBNJ Agreement have elevated oceans within climate and development agendas.
• India’s doctrines like SAGAR (2015) and leadership ambitions in IORA signal a shift towards sustainability-led maritime governance.

Key Points

• The Indian Ocean is among the most climate- vulnerable regions, with threats to coral reefs, fisheries, and coastal livelihoods.
• India’s proposed Blue Ocean Strategy rests on three pillars:
  • Stewardship: Biodiversity protection, ecosystem restoration, sustainable fisheries.
  • Resilience: Ocean observation, early warning systems, disaster preparedness.
  • Inclusive Growth: Green shipping, offshore renewables, aquaculture, marine biotechnology.
• Global ocean finance momentum:  €25 billion existing pipeline and €8.7 billion new commitments (BEFF, Monaco 2025).
  • $7.5 billion annually pledged by Finance in Common Ocean Coalition.
  • $20 billion by 2030 under the One Ocean Partnership.
• India can channel these flows through an Indian Ocean Blue Fund.
• BBNJ Agreement offers India an opportunity to shape governance of global commons.

Static Linkages

• Global commons and sustainable resource use
• EEZs, high seas, and ocean governance
• Climate change impacts on coastal ecosystems
• Disaster management and early warning systems  
• Sustainable development and intergenerational equity
• Role of multilateral environmental agreements

Critical Analysis

• Opportunities
  • Builds on India’s credibility from UNCLOS and Global South leadership.
  • Integrates maritime security with sustainability.
  • Strengthens South–South cooperation with SIDS and African littorals.
• Challenges
  • Fragmented ocean governance across ministries.
  • Gap between global finance pledges and implementation.
  • Managing strategic competition alongside cooperation.
• Ethical Dimensions
  • Intergenerational equity and ecological justice.  
  • Livelihood security of small-scale fishers.

Way Forward

• Ratify and operationalise the BBNJ Agreement.
• Establish an Indian Ocean Blue Fund.
• Integrate maritime security with ecosystem monitoring.
• Promote green shipping corridors and blue bonds.  
• Strengthen technology transfer and capacity- building for vulnerable states.

CRITICAL STORY MEDIA MISSED

• IMF’s Data Quality Assessment Framework (DQAF) has assigned India’s National Accounts Statistics a ‘C’ grade (second lowest).
• The grading coincided with the release of Q2 GDP growth at 8.2%, higher than expectations.
• IMF concerns relate to methodology and data reliability, especially for the unorganised sector.
• Limited media coverage despite implications for economic credibility.

Key Points

• India estimates unorganised sector growth using organised sector proxies.
• Non-agricultural unorganised sector contributes ~30% of GDP.
• IMF flagged weak source data, infrequent surveys, and assumption-heavy estimates.
• Demonetisation, GST, and COVID-19 caused divergence between organised and unorganised sectors.
• Quarterly GDP estimates rely on past trends and assumptions, not real-time data.
• MoSPI is working on base year revision and improved methodology.

Static Linkages

• National income concepts: GDP, GVA, market prices.
• Measurement issues of informal sector (NCERT Macroeconomics).
• Role of MoSPI and CSO.
• Use of IIP and corporate data as proxies.
• Data credibility in policymaking (Economic Survey).

Critical Analysis

• Positives
  • Alignment with UN System of National Accounts.
  • Regular GDP releases aid policy signalling.
  • Base year revision shows institutional intent.
• Concerns
  • Proxy-based estimation risks overstating growth during shocks.
  • Poor coverage of informal enterprises and self- employed.
  • IMF grading may affect global confidence.  
  • Weak public debate due to media under- reporting.

Way Forward

• Increase frequency and coverage of unorganised sector surveys.
• Use administrative data (GSTN, EPFO) with safeguards.
• Strengthen state statistical systems.
• Improve transparency of assumptions.
• Invest in statistical autonomy and capacity.

• WTO data show India has 20 FTAs, excluding recent agreements with the UK (July) and EFTA (October).
• India is negotiating FTAs with the U.S., EU, Canada and SACU, driven by rising protectionism and U.S. tariffs up to 50% on some Indian exports.
• Reports of RCEP re-engagement remain limited to consultations; India exited in 2019 due to concerns over agriculture and rules of origin.
• Past FTAs reveal mixed outcomes, highlighting the need for deeper structural reforms beyond tariff reduction.

Key Points

• ASEAN trade deficit widened from ~$10 bn (2017) to ~$44 bn (2023) (Commerce Ministry).
• Imports from Japan and South Korea rose faster than exports, especially capital- intensive goods.
• Key shortcomings of earlier FTAs:
  • Weak handling of non-tariff barriers (standards, certification, MRAs).
  • Poor alignment with India’s sectoral strengths.
  • Limited industry consultation and low domestic awareness.
• Reviews of ASEAN, Japan and Korea FTAs led to improvements.
• India–UAE CEPA reflects better design; non-oil trade ~ $100 bn in FY25 (DGFT).
• Ongoing talks require sector-specific focus:
  • U.S.: services, seafood, engineering, textiles.
  • EU: iron, steel and cement under CBAM.

Static Linkages

• Comparative advantage and trade balance.
• Non-tariff barriers in global trade.
• Global Value Chains and industrial upgrading.  
• Climate-linked trade instruments.

Critical Analysis

• Advantages
  • Expands market access and export opportunities.
  • Enables integration into global markets.
  • New-generation FTAs show improved balance.
• Concerns
  • Weak manufacturing competitiveness limits gains.
  • Low utilisation of FTA preferences by exporters.
  • MSMEs and agriculture face import pressure.
  • Compliance costs from standards and CBAM.  
  • FTAs alone cannot drive export growth.

Way Forward

• Align FTAs with domestic industrial capabilities.
• Strengthen mutual recognition of standards.  Improve logistics, ports and trade facilitation.
• Support exporters via technology, skilling and market intelligence.
• Link trade policy with climate transition planning.
• Conduct regular FTA impact assessments.

INDIA’S FINAL U.S. DEAL PUSH

Context of the News

• India has submitted a revised and “final” trade offer to the United States amid elevated tariff barriers on Indian exports.
• The U.S. currently imposes a 50% tariff on Indian goods, comprising a 25% reciprocal tariff and an additional 25% penalty linked to India’s import of Russian crude oil.
• India’s immediate diplomatic and commercial priority is the removal of the additional 25% Russia-linked tariff.
• A U.S. delegation led by the Deputy U.S. Trade Representative visited New Delhi in December, though discussions were described as non- negotiational.
• Indian exporters have conveyed that sustained 50% tariffs are damaging export competitiveness and profitability.
• India has offered selective tariff liberalisation to the U.S. as part of a proposed Bilateral Trade Agreement.

Key Points

• India offered immediate tariff elimination on selected U.S. exports:
  • Almonds and walnuts  Apples
  • Certain industrial goods  Luxury motorcycles
• These concessions are conditional upon the removal of the additional 25% U.S. tariff. 
• Exporters are currently absorbing higher tariffs to retain U.S. customers, rather than exiting the market.
• Trade data indicates that India had already reduced Russian oil imports prior to the imposition of U.S. penalty tariffs.
• The negotiation stage has moved from technical discussions to political decision- making.
• The U.S. has publicly acknowledged India’s offer as its most significant trade concession to date.

Static Linkages

• Tariffs as instruments of trade protection and revenue generation.
• Principles of energy security and diversification of import sources.
• Strategic autonomy in foreign economic policy.
• Bilateral trade agreements as exceptions to multilateral trade norms.
• Export competitiveness and cost absorption strategies.

Critical Analysis

• Pros
  • Possible relief for exporters
  • Maintains access to the U.S. market  Reflects pragmatic diplomacy
• Cons
  • Normalises extra-territorial trade pressure  
  • Risks domestic industry exposure
  • Constrains strategic autonomy

Way Forward

• Decouple energy choices from trade negotiations
• Diversify export markets
• Strengthen domestic value chains
• Use WTO-consistent dispute mechanisms