Retail Inflation Hits Record Low in Current Series, To Test RBI’s Statement on Space For Rate Cut

India’s retail inflation eased to 0.25% in October from 1.54% in September, marking the lowest reading in the current CPI series. The decline was driven by broad disinflation in food and beverages, supported by the recent cut in Goods and Services Tax rate.

The sharp fall in inflation reflects the full impact of the GST reforms implemented from September 22, under which most daily-use items were moved to the 5% bracket.

The Reserve Bank of India had revised its CPI projection for 2025-26 to 2.6% in October from 3.7% projected in June, due to sustained disinflation in food and the structural impact of GST rate rationalisation. In its last monetary policy meeting, the central bank had kept rates and stance unchanged, but had said there is space to cut rates.

This was the last inflation before that next policy meeting to be held December 3-5. The record low inflation will put that statement on space for rate cut to test.

Some economists expect October data to represent the bottom of the current inflation cycle, with prices likely to inch up in the coming months due to base effects and potential food supply adjustments. Against this backdrop, the RBI’s Monetary Policy Committee may keep policy rate unchanged in December while signalling a shift toward an accommodative stance.

Still, the central bank could adopt a dovish tone in its commentary, acknowledging easing inflationary pressures and reinforcing its readiness to support growth once disinflation appears durable.

Core inflation, which excludes food and fuel, eased marginally to 4.40% in October from 4.50% in September. This includes the impact of gold prices that have firmed up in the past few months, as the Reserve Bank of India has repeatedly pointed out.

Gold inflation rose to 58% in October from 47% in September.

Food inflation fell to -5.02% in October from -2.28% in September. The decline was broad-based, led by lower prices for vegetables, oils and fats, fruits, cereals, and transport-related items. A favourable base effect also magnified the decline. Rural food inflation stood at -4.85%, while urban food inflation was -5.18%, the lowest in the current CPI series.

At the segment level, rural headline inflation was -0.25% in October, compared to -1.07% in September, while urban inflation eased to 0.88% from 1.83%. Urban inflation remained slightly higher due to relatively firm housing and service costs.