India's Inflation Plummets to 8-Year Low of 1.54% – Rate Cuts on the Horizon?
India's retail inflation falls to an eight-year low of 1.54% in September 2025.
India’s retail inflation fell to 1.54% in September 2025, marking its lowest level since June 2017, according to data released by the Ministry of Statistics on October 13, 2025. The significant decline in the Consumer Price Index (CPI)-based inflation, down from 2.07% in August and 1.55% in July, was primarily driven by falling prices in food and core items. This figure aligns closely with Bloomberg analysts’ projections of approximately 1.5% for September, reflecting a continued disinflationary trend in the Indian economy.
The food and beverage sector recorded a notable disinflation of -1.37% in September, a sharp contrast to the marginal 0.05% inflation in August. Vegetable prices saw a dramatic year-on-year decline of 21.4%, compared to -15.92% in the previous month, largely due to seasonal corrections in perishable food costs. Other key categories also exhibited moderated inflation: cereal prices dropped to 2.06% from 2.7%, milk and milk products held steady at 2.6% compared to 2.7%, while meat and fish prices rose slightly to 2.15% from 1.5%. Non-food segments followed suit, with clothing and footwear inflation easing to 2.3% from 2.5%, housing inflation marginally up at 3.2% from 3.1%, and fuel and light inflation declining to 2.4% from 2.7%.
The September inflation rate, well below the Reserve Bank of India’s (RBI) target range of 2-6%, marks the second instance this quarter where inflation has dipped below the lower band. Radhika Rao, senior economist at DBS Bank, attributed this to seasonal corrections in perishable food prices, noting that while excess monsoon rains may affect production in some regions, the disinflationary trend is unlikely to be disrupted. Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, suggested that the impact of recent GST cuts could push inflation even lower, potentially below 1% in October.
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The benign inflation environment, coupled with stable economic growth, has fueled speculation about monetary policy easing. Analysts suggest the RBI may consider rate cuts of 25-50 basis points in the near future. However, festive season-driven surges in retail sales could obscure underlying demand trends, complicating the timing of any policy adjustments. As India navigates this low-inflation landscape, the RBI’s next moves will be closely watched for their potential to stimulate growth while maintaining economic stability.
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