Common people have got a big relief on inflation in India. Retail inflation has come down to just 0.25% in the month of October, which is the lowest level in the last 10 years. This rate was 0.54% in September. Inflation has remained below the Reserve Bank of India’s target of 4% for four consecutive months. This is the seventh consecutive month when inflation has been less than the central bank’s upper limit of 6%.
Big fall in food prices
The biggest reason for falling inflation is the continuous decline in food prices. Especially the prices of vegetables have been witnessing a continuous two-digit decline for the last six months. Since the share of food items in the Consumer Price Index (CPI) is almost half, the cheapness of food items has had a big impact on the overall inflation.
Effect of GST rate cut
Experts believe that the cut in GST rates has also contributed to this decline. At the end of September, tax rates on many essential commodities were reduced, the effect of which is now clearly visible in the inflation figures.
Economy fast, but inflation slow
The interesting thing is that despite the decline in inflation, the pace of the country’s economy remains fast. India’s GDP grew at the rate of about 8% in the April-June quarter. That is, despite the increase in production and expenditure, prices are not increasing. This is why it is now expected that RBI may cut interest rates in the coming month, so that growth can be further boosted.
RBI’s new estimate and further situation
The Reserve Bank of India said in its recent meeting that the current situation is favorable for policy relaxation (rate cut). However, the bank has kept the interest rates stable for now. RBI estimates that inflation may further decline to 2.6% in fiscal year 2026, which is much lower than its earlier estimate of 3.1%. Quarter wise, it is estimated that it may be 1.8% in the second and third quarter, 4% in the fourth and 4.5% in the first quarter of the next financial year.
Caution is also necessary
However, the central bank has cautioned that factors like geopolitical tensions, trade barriers and changes in import duties may affect the future trend of inflation. RBI Governor Sanjay Malhotra said that the sharp fall in food prices and rationalization of GST rates have made the overall inflation outlook more favourable.