India’s retail inflation slowed to a record low of 0.25 per cent in October against 1.54 per cent in September, as food prices fell sharply and tax cuts brought down the prices of items from cars to products in daily use, government data showed on Wednesday.
This marks the fourth consecutive month that inflation has stayed below the Reserve Bank of India’s (RBI) medium-term target of 4% and has been lower than the central bank’s tolerance ceiling of 6% for seven straight months.
A Reuters poll of 42 economists had forecast retail inflation in October to ease to 0.48%.
Retail inflation was the lowest on record in the current data series, which began in 2015 and uses 2012 price levels as a reference point. The print for September was revised to 1.44%.
Food prices, which account for nearly half of the Consumer Price Index (CPI) basket, fell 5.02% year-on-year in October against a revised fall of 2.33% in September, the lowest of the current CPI series.
"The decline in headline inflation and food inflation during the month of October is mainly attributed to the full month’s impact of decline in GST, favourable base effect and to the drop in inflation of Oils and fats, Vegetables, Fruits, Egg, Footwear, Cereals and products, Transport and Communication etc," said the central government in a press release.
Inflation is cooling rapidly even as the latest official data showed Asia's third-largest economy grew nearly 8% in the April-June quarter, with the central bank expected to cut interest rates again next month.
Meanwhile, inflation rates for rural and urban stood at –4.85% and -5.18%, respectively. The year-on-year inflation rate for the fuel and light category was recorded at 1.98% in October 2025.
Vegetable prices
Vegetable prices declined 27.57% after a 21.38% fall a month ago.
The prices have fallen by double digits for six consecutive months on an annual basis, keeping overall food inflation, which accounts for nearly half of the consumer price index (CPI) basket, in check.
While inflation has been below the RBI's 4% target since February, economists say this masks shifts in household spending patterns.
The Household Consumption Expenditure Survey for 2023-24 showed the share of food in the average Indian household's budget has declined.
RBI's inflation outlook
RBI during its Monetary Policy Committee meeting last month signalled that a benign inflation backdrop provided scope for further policy easing to support growth, even as it held rates steady as expected.
The central bank said inflation has eased and is likely to moderate further in FY26, supported by GST rate cuts, a favourable outlook on food prices and improved supply prospects. However, it cautioned that geopolitical tensions and tariff-related trade disruptions could weigh on the outlook.
For the full year FY26, the RBI has projected headline inflation at 2.6%, significantly lower than the 3.1% forecast made in August. Quarter-wise estimates are: 1.8% in Q2, 1.8% in Q3, Q4 at 4% and Q1 FY27 at 4.5%. The central bank maintained that risks to the outlook are “evenly balanced.”
The RBI also noted that Core inflation has remained largely contained at 4.2% in August.
Governor Sanjay Malhotra said, "The MPC observed that the overall inflation outlook has turned even more benign in the last few months due to a sharp decline in food prices and the rationalisation of GST rates."
"Overall the benign inflation and growth trajectory does provide room for 25-50bp rate cuts. However, the festive-linked surge in retail sales may make it difficult to gauge the underlying sustainable demand in the economy and hence the timing of easing may become more difficult," Kotak Mahindra Bank's Bhardwaj added.
Source Name : Economic Times