Retail inflation has dropped to an eight-year low of 1.54 percent in September. This decline places it below the Reserve Bank’s comfort zone for the second time in 2025. The decrease is largely due to subdued prices in key food categories. Government data released on Monday highlighted this significant shift in economic indicators.
In August, the consumer price index stood at 2.07 percent. A year ago, in September 2024, it was much higher at 5.49 percent. The current figure is the lowest since June 2017, when it was 1.46 percent. This trend underscores a notable easing in price pressures across the economy.
The Reserve Bank of India has a clear mandate. It must ensure CPI inflation remains at 4 percent, with a 2 percent margin on either side. This target provides a framework for monetary policy decisions. The recent data shows inflation well within this range, signaling potential for accommodative measures.
Headline inflation decreased by 53 basis points from August to September. The National Statistics Office confirmed this is the lowest year-on-year inflation since June 2017. Such a drop reflects broader economic adjustments. It also points to effective policy impacts on market stability.
Food inflation turned negative in September. It recorded -2.28 percent compared to -0.64 percent in August. Last year, it was a high 9.24 percent in the same month. This sharp reversal highlights the volatility in food prices and their outsized influence on overall inflation.
The decline in inflation is attributed to several factors. A favourable base effect played a key role. Additionally, prices dropped for vegetables, oils, fruits, and pulses. Cereals, eggs, and fuel also contributed to the softer inflation print.
Rural and urban areas showed varied inflation rates. Rural India experienced 1.07 percent inflation, while urban parts saw 2.04 percent. This disparity reflects differing consumption patterns and economic activities. Regional differences further illustrate the uneven impact of inflation.
Kerala had the highest inflation at 9.05 percent. Uttar Pradesh recorded the lowest at -0.61 percent. Such variations underscore the diverse economic conditions across states. Local factors heavily influence these inflation outcomes.
The Reserve Bank revised its inflation projection for 2025-26. It lowered the estimate to 2.6 percent from 3.1 percent in August. This adjustment reflects the ongoing disinflationary trends. It also signals confidence in sustained price stability.
For the second half of the fiscal year, the outlook remains positive. A healthy monsoon, higher kharif sowing, and adequate reservoir levels support this view. Comfortable buffer stocks of foodgrains should keep food prices benign. These factors collectively dampen inflationary pressures.
Recent GST rate rationalisation will further reduce prices. Several items in the CPI basket are expected to become cheaper. This policy move aligns with efforts to control inflation. It also boosts consumer purchasing power.
Overall, inflation is likely to be softer than previously projected. The August MPC resolution anticipated higher rates. Benign food prices and GST cuts have altered that forecast. Economic conditions now favor lower inflation persistence.
Aditi Nayar, Chief Economist at ICRA, commented on the data. She noted CPI inflation eased to a 99-month low in September 2025. This was driven by sharper-than-expected disinflation in food and beverages. Despite upticks in other categories, the overall trend remains downward.
The consumer price index continues to reflect these dynamic changes. Its movements are closely watched by policymakers and markets alike. As inflation trends lower, it opens up space for growth-focused strategies. The economic landscape is shifting in favor of stability and recovery.
This low inflation environment benefits consumers and businesses. It reduces cost pressures and supports real income growth. With careful monitoring, this trend could sustain economic momentum. The focus now is on maintaining this delicate balance.