Retail inflation slowed to an over 8-year low of 1.54 per cent in September and slipped below the Reserve Bank's comfort zone mainly due to subdued prices of vegetables, fruits and pulses, according to government data released on Monday.
The consumer price index (CPI) based inflation was 2.07 per cent in August and 5.49 per cent in September 2024. The previous low was 1.46 per cent in June 2017. It is for the second time that retail inflation has slipped below 2 per cent in 2025. The government has mandated the RBI to ensure that the Consumer Price Index (CPI) remains at 4 per cent with a margin of 2 per cent on the either side.
"There is decrease of 53 basis points in headline inflation of September 2025 in comparison to August 2025. It is the lowest year-on-year inflation after June 2017," the National Statistics Office (NSO) said. Year-on-year food inflation during September 2025 was (-) 2.28 per cent compared to (-) 0.64 per cent in August and 9.24 per cent in September last year.
"The decline in headline inflation and food inflation during the month of September 2025 is mainly attributed to favourable base effect and decline in inflation of vegetables, oil and fats, fruits, pulses and products, cereal and products, egg, fuel and light," NSO said.
According to the NSO data, inflation in rural India was at 1.07 per cent and in urban parts at 2.04 per cent. Highest inflation was in Kerala at 9.05 per cent and lowest in Uttar Pradesh at (-) 0.61 per cent. In its October bimonthly monetary policy, the Reserve Bank lowered its inflation projection for 2025-26 to 2.6 per cent from 3.1 per cent estimated in August.
Regarding the inflation outlook for second half of the fiscal, RBI said healthy progress of the south-west monsoon, higher kharif sowing, adequate reservoir levels and comfortable buffer stock of foodgrains should keep food prices benign.
It said the recently implemented GST rate rationalisation would lead to a reduction in prices of several items in the CPI basket. Overall, the inflation outcome is likely to be softer than what was projected in the August MPC resolution, primarily on account of the GST rate cuts and benign food prices.
The CPI inflation eased to a 99-month low pulled down by sharper-than-anticipated disinflation in food and beverages to 1.4 per cent (an 81-month low), despite several other categories recording a sequential uptick in year-on-year inflation prints.
Earlier this month, Reserve Bank of India expectedly left its key interest rates unchanged as it waited for greater clarity on the impact of US tariffs as well as playout of earlier rate cuts and recent tax reductions.
"Looking ahead, a favourable base effect is expected to further ease retail inflation in October. Additionally, the impact of GST rate rationalization will provide further support. However, much will depend on the full pass-through of the effective GST rates.
Also read: Retail inflation drops to 8-year-low
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