India’s retail inflation fell to its lowest level on record, registering at just 0.25% in October, according to data released by the Ministry of Statistics on Wednesday. This marks a sharp decline from 1.44% in September and represents the lowest year-on-year rate in the current Consumer Price Index (CPI) series. Analysts surveyed by Bloomberg had projected inflation to come in at 0.4%, making the actual reading substantially lower than expectations.

The government attributed this steep fall to a combination of three factors — the reduction in Goods and Services Tax (GST) rates, a favorable base effect from the previous year, and a significant decline in food prices. The data shows a steep drop in the cost of several essential commodities, including oils, fats, vegetables, fruits, and cereals. Food inflation, which is often the biggest contributor to overall prices, decreased by 5.02%, while the food and beverages index dropped by 3.72%.

The internal breakdown of the CPI data shows a mixed trend within the food basket. Prices of cereals and products rose by 0.92%, while meat and fish prices climbed 1.74%. Egg prices too saw a slight increase of 1.33%. However, vegetable prices fell dramatically by 27.57%, pulses dropped 16.15%, and spices declined 3.29%. Oils and fats showed an unexpected rise of 11.17%, counterbalancing some of the food basket’s broader downward pressures. Outside the food category, housing costs increased by 2.96%, clothing and footwear by 1.7%, and fuel and lighting by 1.98%.

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Despite the historic low in overall inflation, the Reserve Bank of India (RBI) will likely keep monitoring core inflation closely. Core inflation, which excludes volatile food and fuel components, increased slightly to 4.49% in October from 4.37% in September — marking its highest level since September 2023. The figures suggest that while headline inflation has softened sharply, underlying price pressures in non-food sectors remain resilient.

With India’s inflation now substantially below the RBI’s 2-6% target range for the third consecutive month this quarter, analysts believe the central bank may have added room to maintain accommodative monetary conditions. Economists note that the data points to easing pressure on household budgets and a potential boost to consumption during the festive season. However, they warn that fluctuations in global commodity prices and weather conditions could affect the inflation trajectory in coming months.

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