India’s annual retail inflation saw a marked drop to a historic low of 0.25% in October 2025, down sharply from September’s revised figure of 1.44%. This figure sits well below the Reserve Bank of India’s target tolerance band of 2% – 6% for inflation—marking the second consecutive month of sub-target readings.
Key Highlights
- India’s retail inflation fell to a record low of 0.25% in October, driven by cheaper food.
- The sharp decline boosts hopes for an RBI rate cut as price stability strengthens economic outlook.
The drop in inflation was largely driven by a steep decline in food prices. Food inflation fell 5.02% year-on-year, and vegetable prices plunged 27.57% in October after a 21.38% drop in the prior month. The government cited the full-month impact of recent reductions in the Goods and Services Tax (GST) on hundreds of mass-consumption items—including dairy and personal-care goods—as a key contributor to the disinflation.
Despite the sharp fall in headline inflation, core inflation (which excludes volatile food and fuel components) remained at around 4.4%. Economists attributed this sustained core inflation partly to another factor: a nearly 5% rise in domestic gold prices during October, which pushed up the miscellaneous goods & services category.
Also Read: Retail Inflation Drops to 1.54% in September, Lowest Since 2017
Growth for the wider economy remains strong (with Q1 FY26 growth estimated near 7–8%), meaning that the disinflation is not entirely demand-driven but reflects base-effect benefits and tax cuts.
Looking ahead, analysts expect this historic low may represent a floor in the inflation cycle. Many believe inflation will begin to climb again in early 2026 as base effects fade and seasonal pressures return. With inflation so low, the RBI now appears more likely to cut its policy rate—potentially by 25–50 basis points in December 2025—to support growth.
