India's Retail Inflation Hits Record Low, Paving Way for Potential Rate Cuts

India's retail inflation fell to a historic low of 0.25% in October 2025, down from 1.54% in September, marking the lowest rate since the current Consumer Price Index (CPI) series began in 2015. This decline is attributed primarily to a significant drop in food prices and the impact of recent Goods and Services Tax (GST) cuts. Food prices decreased by 5.02% year-on-year, with vegetable prices plummeting by 27.57%. The decline in inflation was also supported by a favorable base effect, as food inflation was notably high in the same month last year.

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The Indian government implemented GST reductions on numerous essential goods in late September, aiming to stimulate domestic consumption amid rising global trade tensions, particularly following the imposition of punitive tariffs by the U.S. on Indian exports. The central bank, the Reserve Bank of India (RBI), has maintained its key policy rate at 5%, but the current inflation trends have led to speculation about potential rate cuts in the upcoming monetary policy meeting scheduled for December 2025.

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Economists suggest that the low inflation rate could provide the RBI with the flexibility to lower interest rates to support economic growth. Garima Kapoor of Elara Securities anticipates that inflation for the fiscal year 2026 will remain below 2%, paving the way for a 25-basis-point rate cut in December and possibly another in February 2026. However, some analysts caution that persistent disinflation could pose risks to rural incomes and overall economic growth, as prolonged low inflation may dampen consumer spending.

India’s Inflation Falls To Its Lowest Level On Record

While the current inflation figures are seen as beneficial for corporate margins and easing debt burdens, experts warn that a sustained period of low inflation could lead to challenges. Shivaan Tandon, an economist at Capital Economics, noted that the rise in gold prices has countered some of the benefits from GST cuts, indicating that core inflation remains elevated at 4.4%. Additionally, concerns have been raised about the sustainability of the current economic momentum, especially if low inflation persists.

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The RBI has indicated that the overall inflation outlook has improved, allowing for potential policy easing. Governor Sanjay Malhotra mentioned that the benign inflation environment provides room for rate cuts, although the festive season's impact on demand may complicate the timing of such decisions. The RBI's projections for FY26 now estimate inflation at 2.6%, a reduction from previous forecasts.

Retail inflation slows to a record low of 0.25% in OctoberReutersReutersCNBCIndia’s Inflation Falls To Its Lowest Level On RecordIndia's inflation tanks to record low in October

• “We see FY26 CPI below 2% paving way for a December 2025 rate cut by the RBI and see another 25-basis-point cut in February 2026,” — Garima Kapoor, Elara Securities

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• “The continued surge in gold price inflation, which feeds into the miscellaneous goods and services category, appears to have more than offset the impact of the GST cuts,” — Shivaan Tandon, Capital Economics

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• “Overall the benign inflation and growth trajectory does provide room for 25-50bp rate cuts.” — Bhardwaj, Kotak Mahindra Bank

Retail inflation slows to a record low of 0.25% in October

India's record-low inflation in October 2025 presents both opportunities and challenges for policymakers. While it opens the door for potential rate cuts to stimulate growth, the long-term implications of sustained low inflation must be carefully monitored to ensure economic stability.

India’s Inflation Falls To Its Lowest Level On Record