Inflation Nears Zero: October Retail Inflation Drops to 0.25%

During October, the retail inflation slowed down to a record-low of 0.25%, which is a level last seen ten years back. Even in the month of September, the retail inflation stood at 1.44% (revised). This sharp fall in inflation is a result of the declining food prices and the new GST rates, which helped in reducing the prices of different products and services to a great extent. 

Inflation Slowing Down 

India was struggling with inflation even a year back, and now, for the last four months, the retail inflation has been on a downward journey continuously. While the inflation was coming down from the early months of the year but in the mid months, there were a few hikes again, but now for the past four months, it has been dropping significantly and continuously, which is helping the economy revive. It is already way lower than the medium-term target of the RBI, which is 4% and the upper tolerance level is 6%. 

But the October drop surprised everyone. While it was anticipated by the economists that the inflation would come down drastically in October, a 0.25% inflation, the lowest in the decade, hardly anyone thought of. 

Food & Vegetable Prices 

One of the primary reasons behind the drop in the Consumer Price Index is the drop in food and vegetable prices. A few months back, when the CPI inflation wasn’t coming down significantly, the reason was food prices only, and now the same is the reason behind the significant drop. 

Food prices declined 5.02% YoY in October, compared to a 2.33% drop in September 2025. From vegetable prices to cereals, fruits, prices of all these products went down. Vegetable prices declined 27.57% in October, and during September, they already dropped by 21.38%. Vegetable prices are now falling for the 6^th consecutive month, and that too in double digits, taking the overall food inflation down. 

However, one thing to note here is that, as per the Household Consumption Expenditure Survey for 2023-2024, the share of expenses made on food in household budgets has also declined significantly. 

Headline inflation 

While the food inflation has been the star of the drastic decline in India’s retail inflation, headline inflation has also been declining significantly. Here, GST rate cuts played a crucial role as well. From footwear to transportation and communication, fuel, and even light became cheaper in October 2025. 

Rural Vs Urban Inflation 

The rural inflation dropped by 4.85% and the urban inflation dropped by 5.18% during the month. This shows that both rural and urban inflation have dropped significantly without any significant gap between the two. 

RBI’s Outlook on Inflation in India

When inflation drops, everyone becomes hopeful of rate cuts, but what’s the take of the RBI in this matter? Let’s find out. During the RBI’s Monetary Policy Committee (MPC) meeting in October, it indicated that a further drop in inflation can lead to further policy easing; however, during that meeting, it didn’t change the repo rate and kept it at 5.5% 

While suggesting further rate cuts in the MPC may follow in the remaining of FY26 but it also showed its concerns over the geopolitical tensions and cautioned that tariff-related disruptions in trade can change the outlook. 

Source: TheEconomicsTimes

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