The RBI survey finds people optimistic about lower inflation, translating into higher household cash in hand.
New Delhi: The Reserve Bank of India’s Inflation Expectations Survey of Households (IESH), November 2025, has shown that households expect inflation to ease further, which means there is more monetary policy space for the RBI in the coming months.
On 5 December, 2025, the RBI released four forward-looking surveys:
However, in this article, we are only going to look at the IESH. Before going further, it is essential to understand what IESH is. Then we will delve into what the survey says, its impact and a conclusion.
What is Inflation Expectation Survey of Households?
Since September 2005, the RBI has conducted the Inflation Expectations Survey of Households (IESH) on quarterly basis. The survey collects both qualitative responses on expected price changes for the next three months and one year, along with quantitative responses on current and future inflation.
Household inflation expectations influence consumer behaviour and have long-term economic implications.
The survey covers 19 major cities and draws responses from around 6,000 households, and provides insights into price expectations across categories such as food, non-food items, housing, household durables and services.
The survey asks households about their outlook for the next three months and one year to help policymakers understand consumer inflation sentiment.
What does it say?
The November 2025 round, which was conducted between November 1-10, 2025, is vital for the RBI as it reflects inflation expectations, which impact spending, saving, and monetary policy decisions.
The latest survey showed a decrease in median inflation perception by 80 basis points (bps) to 6.6 percent, indicating households expect lower price increases. This data helps gauge household confidence in price stability and supports the RBI’s economic outlook.
The downward trend was also reflected in future expectations. The median inflation expectation for the next three months declined by 50 basis points to 7.6 percent, while the one-year-ahead expectation decreased by 70 basis points to 8.0 percent.
As a result of this change, fewer respondents expected prices and inflation to increase in the short-term and one year ahead. Households reported reduced price and inflationary pressures across different product categories such as food, non-food items, and services.
In November 2025, 74.6 percent of respondents expected a general price increase in the next three months.
Expectations for price increase in food products have also come down, with 83.6 percent of respondents expecting only a general price increase in the next year. When analyzing the expectations by respondent categories, the overall median current inflation perception was 6.6 percent, with expectations for the next three months is at 7.6 percent and for the next year at 8.0 percent.
The median perception of male was slightly higher (6.8 percent) than female (6.4 percent). Homemakers reported the lowest median current perception (6.4 percent) but the highest expectation for one year ahead (8.4 percent).
In terms of cities, Mumbai had the highest median expectation for inflation three months ahead (10.1 percent), while Ahmedabad had the lowest (5.7 percent).
In November 2025, 62.4 percent of households anticipated that general price trends would follow those of food products in the next three months.
This alignment was even stronger for the one-year outlook, with 83.4 percent of respondents expecting general prices to mirror food products prices.
An analysis of respondents’ current inflation perceptions and their one-year-ahead expectations in November 2025 revealed how their views on the present rate influenced their future outlook.
For example, among those perceiving the current inflation rate between 4 percent and <5 percent, the majority expected the one-year-ahead rate to fall between 5 and <6 percent.
Similarly, for respondents perceiving the current rate between 2 and <3 percent, the highest number anticipated the one-year-ahead rate to be between 5 and <6 percent, with a notable group expecting it to be between 3 and <4 percent.
Impact of the IESH
Lower inflation expectations give the Reserve Bank of India greater flexibility and space in its monetary policy stance. As inflationary pressures subside, the central bank can continue or expand its supportive measures, bolstering the effectiveness of its recent repo rate cut.
This situation enables the RBI to strike a balance between fostering growth and controlling inflation, enhancing its policy options during a critical period of stability.
Lower inflation expectations leads to increased consumer confidence. The consumption expenditure will increase rather than postponing, when households expect prices to decline or remain stable. This can boost investments in durable and discretionary spending, thereby stimulating demand in various sectors. The psychological impact of lower inflation is just as significant as the actual price fluctuations, as confidence plays a key role in driving consumer spending behaviour.
A stable inflation outlook provides businesses with certainty, enabling effective long-term planning. This reduces concerns about fluctuating costs and price volatility, allowing firms to invest confidently in projects, expand capacity, and drive innovation.
Predictable inflation also supports smoother wage negotiations and pricing strategies, creating a conducive environment for sustainable growth.
4.For Growth
The RBI’s upgraded GDP forecast of 7.3 percent for FY26 is supported by cooling inflation expectations, boosting investor confidence in the economy. Accommodative monetary policy, strong consumer demand, and positive business sentiment create a favourable environment for India’s growth.
Strategic takeaway
The survey highlights a change in household sentiment towards stability, supporting the RBI’s focus on controlled inflation and sustainable growth. This could lead to increased domestic demand and a smoother path for monetary policy in 2026.
Conclusion
The latest IESH survey shows a clear picture of household sentiment, with confidence in price stability increasing and inflation fears easing. This supports the RBI’s recent policy decisions, i.e. rate cut, and also boosts the growth narrative for FY2026. India is positioned for sustained growth, thanks to controlled inflation, while households are hoping for relief while the RBI sees potential for growth.
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