India’s inflation cools to decade low as food prices fall, GST cuts take effect

CHENNAI, NOV 12 : India’s retail inflation eased sharply to 0.25 percent in October 2025, marking the lowest level in the current Consumer Price Index (CPI) series. The steep fall from 1.54 percent in September was driven by a combination of lower food prices, supply-side easing, and GST rate cuts that reduced the cost of several essential items.

According to data from the Ministry of Statistics and Programme Implementation (MoSPI), food inflation turned negative at -5.02 percent, significantly pulling down the overall index. Prices of vegetables, cereals, and pulses recorded notable declines due to improved arrivals and favourable weather conditions. The drop was also aided by a strong base effect, as food prices were unusually high during the same period last year.

The GST rate rationalisation, implemented in late September, also played a key role. The government’s move to simplify the structure into two main slabs—5 percent and 18 percent—and to shift several daily-use items such as dairy products and stationery to the lower bracket, brought immediate relief to consumers. The indirect tax reduction helped soften retail prices across several categories.

Economists say the fall in inflation reflects both structural and temporary factors. While the GST cuts and improved supply chains have eased near-term pressures, the exceptionally low reading also reflects a favourable statistical base. Some experts caution that inflation could inch up again once the base effect fades or if food and global commodity prices rise in the coming months.

For the Reserve Bank of India (RBI), the data offers greater policy flexibility. With inflation well below the 4 percent target and far under the 6 percent upper tolerance limit, the central bank may find more room to support growth. Core inflation, however, remains sticky at around 4.2–4.5 percent, suggesting that underlying price pressures in non-food and non-fuel items persist.

Consumers are seeing immediate benefits from cheaper food and essential goods, improving household purchasing power. Businesses, especially in the fast-moving consumer goods (FMCG) and retail sectors, are also experiencing lower cost pressures, though sustained deflation could squeeze margins if demand remains weak.

Analysts expect inflation to stay subdued in the short term, averaging around 1–2 percent over the next two quarters before gradually rising towards 3 percent by the end of FY2025–26. The RBI’s latest forecast pegs average inflation for the fiscal year at 2.6 percent, revised down from earlier estimates.

-PTI