Wednesday, 15 Oct, 2025
September's food inflation rate, which was -2.28 percent, was in the negative range for the fourth consecutive month. Image Source: IANS
As a result of a persistent easing of price pressures across important consumption categories, this represents the lowest annual inflation rate since June 2017 and is also lower than the 2.05 percent recorded in August.
India’s retail inflation, measured by the Consumer Price Index (CPI), eased sharply to an over eight-year low of 1.54 percent in September, marking a significant decline from the same month a year earlier. According to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday, the decline was mostly caused by a prolonged decline in the price of food and fuel. As a result of a persistent easing of price pressures across important consumption categories, this represents the lowest annual inflation rate since June 2017 and is also lower than the 2.05 percent recorded in August.
September's food inflation rate, which was -2.28 percent, was in the negative range for the fourth consecutive month. According to the official statement, this decline was caused by a combination of a favourable base effect and a general decline in the cost of necessities like fruits, vegetables, cereals, pulses, eggs, and edible oils. The general inflationary trend was also lessened by a moderated increase in fuel prices. The Ministry pointed out that this disinflationary phase has been influenced by a number of seasonal and structural factors. Stabilising the food supply and prices has been made possible by a favourable southwest monsoon, healthy kharif crop sowing, sufficient reservoir levels, and cosy buffer stocks of foodgrains.
Source: Ministry of Statistics and Programme Implementation
In addition to lowering the prices of a variety of goods and services, the September 22 rate cuts for the Goods and Services Tax (GST) are now beginning to have an impact on the economy and are anticipated to further reduce inflation in the months to come. The steep drop gives the RBI more policy options because inflation is now significantly below its comfort level. In order to sustain growth momentum in the face of a stable price environment, the RBI may be urged to adopt a more accommodating monetary policy, which would involve lowering interest rates or adding liquidity.
In light of this change, the RBI's Monetary Policy Committee (MPC) lowered its inflation prediction for FY 2025–2026 from 3.1 percent in August to 2.6 percent in its October 1 meeting. The impact of stable food prices, a favourable base, and GST rate reductions were major factors in the revision, which indicates that India's inflation outlook has become less alarming in the near future.
RBI Governor Sanjay Malhotra said, “The recently implemented GST rate rationalisation would lead to a reduction in prices of several items in the CPI basket. Overall, the inflation outcome is likely to be softer than what was projected in the August monetary policy committee resolution, primarily on account of the GST rate cuts and benign food prices.”
The RBI Governor noted that headline CPI inflation fell to 1.6 percent year-over-year in July 2025, its lowest level in eight years, before increasing to 2.1 percent in August, marking the first increase in nine months. A significant drop in food inflation from its peak in October 2024 has been the main driver of benign inflation conditions thus far in 2025–2026. Between June and August, the fuel group's inflation rate fluctuated within a small range of 2.4 percent to 2.7 percent. In August, core inflation stayed mostly under control at 4.2 percent. Core inflation, excluding precious metals, was 3.0 percent in August.
Aditi Nayar, chief economist, ICRA, said, “The CPI inflation eased to a 99-month low 1.5 percent in September 2025, pulled down by a sharper than anticipated disinflation in food and beverages to 1.4 percent (81-month low), despite several other categories recording a sequential uptick in YoY inflation prints. For instance, inflation for miscellaneous items shot up to 5.35 percent in September 2025, boosted by the surge in prices of gold and silver. We expect the CPI inflation to average 2.6% in FY2026, dampened by the GST rationalisation as well as the continued benign food prices. ICRA believes that a final 25 bps rate cut is possible in December 2025, with its timing contingent on the degree of further transmission of the cumulative 100 bps rate cuts to the credit market as well as growth implications of GST rejig and tariffs.”
