Inflation reduced
Due to continuous decline in food prices, India’s retail inflation came down to 1.54% in September, below the Reserve Bank of India’s target of 2-6%, which was 2.07% in August. This is the lowest level of inflation since June 2017. This means that inflation has come down to the lowest level in 8 years only in September 2025.
Reuters surveyed 38 economists who estimated that retail inflation could decline to 1.70% in September. Inflation in food items, which constitutes almost half of the Consumer Price Index (CPI), further declined to -2.28% in September, compared to -0.69% in the previous month. In recent months, food prices have declined significantly from last year’s high levels, with vegetable prices in particular falling in double digits since April. Price pressure has been below the Reserve Bank of India’s 4% target for seven consecutive months. Economists thought the base effect controlling inflation this year would end in August, but official data shows that food prices remained under control compared to last year, and this trend may have continued in September.
Impact of GST visible
Latest data shows that price pressures are likely to remain low and the easing of Goods and Services Tax (GST) will keep prices under control in the coming months. Earlier this month, the Reserve Bank of India (RBI) reduced its inflation forecast for fiscal year 2026 from 3.1% to 2.6%, citing better supply and reduced cost pressures. But the inflation figure has come even lower than this.
RBI Governor Sanjay Malhotra said on October 1 that the recent easing of GST rates will reduce the prices of many items in the Consumer Price Index (CPI). Overall, inflation figures are likely to be lower than estimated in August, mainly due to the cut in GST rates and softening of food prices. With inflation well below the RBI’s mid-term target of 4%, analysts expect policymakers to focus on boosting the economy. Economists have expected another 25 basis points cut in interest rates in the December meeting. RBI has reduced interest rates by 100 basis points since the beginning of this year.