India’s retail inflation (based on the Ministry of Statistics and Programme Implementation consumer price index) fell sharply to 0.25% year-on-year in October 2025. This is the lowest level recorded in the current CPI series (which uses base 2012=100) and marks a significant moderation in price pressures. In September, inflation was around 1.44%.
What’s driving the sharp fall
- The food basket recorded deflation, with food inflation registering around -5.02% in October.
- Key contributors: falling prices of oils & fats, vegetables, fruits, eggs, cereals and transport & communication.
- A higher base effect: last year’s (October 2024) inflation was much higher, so the year-on-year comparison aids the drop.
- GST rate rationalisation / cuts taking full effect from late September contributed to the easing.
Breakdown: rural vs urban
- Rural inflation: around -0.25% in October.
- Urban inflation: about 0.88% in October.
- Food inflation: urban approx −5.18%, rural −4.85%.
Why this matters
- The inflation rate is now well below the medium-term target range of the Reserve Bank of India (RBI), which is around 4% (with tolerance). This creates space for monetary policy. Moneycontrol
- For consumers: lower inflation boosts purchasing power, especially for staple goods.
- For businesses: healthy deflation in input/food products may ease cost pressures, but too low inflation can also indicate weak demand.
- For the economy/policy: The sharp drop gives the RBI more flexibility, but also calls for vigilance in case inflation reverses.
Risks & things to watch
- Core inflation (excluding food and fuel) might still be elevated. A low headline number doesn’t guarantee all sectors are easing.
- A very low inflation print might signal weak demand, which could be concerning for growth.
- Supply-side shocks (weather, global commodity prices) could reverse the trend.
- Watch for how monetary policy responds: with inflation so low, will the RBI cut rates further, stay cautious, or adjust its stance?
What next
- Monitor upcoming inflation data (November, December) to see if this is a one-off drop or the start of a sustained low inflation phase.
- Keep an eye on how the RBI signals policy: any rate cuts or change in guidance may follow.
- Observe how consumer demand evolves: low inflation is good, but recovery in consumption and investment is also vital for growth.
- Track sectors especially sensitive to inflation (food retail, consumer durables, real estate) to assess impact.
Summary
India’s retail inflation falling to 0.25% in October is a significant milestone. The fall is largely driven by food deflation, base effects and policy moves. While the low inflation opens up policy space and is positive for consumers, the economy must ensure that demand stays robust and inflation doesn’t reverse unexpectedly.
