India's retail inflation has eased to 1.54% in September 2025, marking the lowest level since June 2017. This is a significant drop from 2.07% in August and also below market expectations of 1.7%. The decline is primarily attributed to a persistent cooling in food prices, coupled with a favorable base effect from the previous year.
The inflation rate has now fallen below the Reserve Bank of India's (RBI) lower tolerance limit of 2% within its 2-6% target range for the second time in three months. For seven consecutive months, price pressures have remained below the RBI's medium-term target of 4%.
Food prices, which constitute nearly half of the Consumer Price Index (CPI) basket, experienced a substantial drop of 2.28%. This marks the largest decline since December 2018, when a record 2.65% fall was recorded. A sustained slide in vegetable costs, which have fallen by double digits since April, has largely driven this decrease in food prices. Specifically, cheaper vegetables and pulses have contributed to the cooling of retail inflation.
In September 2024, food inflation had seen a jump to 9.2% from 5.7% the previous month, which created a favorable base effect for September 2025.
Besides food, inflation also moderated in other categories, including clothing and footwear (2.28% vs. 2.33% in August) and fuel and light (1.98% vs. 2.32%).
Conversely, some categories experienced increased price pressures. These include pan, tobacco, and intoxicants (2.73% vs. 2.49%), housing (3.98% vs. 3.09%), and miscellaneous items (5.35% vs. 5.05%).
The easing of retail inflation is also influenced by the Goods and Services Tax (GST) rate cut.
The Ministry of Statistics and Programme Implementation released the CPI inflation data for September 2025, revealing that food inflation remained negative for the fourth consecutive month.
The retail inflation had risen in August for the first time since October 2024, driven by higher prices for items like tomatoes, eggs, meat, and fish, along with a weaker deflationary pull from other food items.
The current quarter's inflation is expected to remain below the 2% limit, projected at 1.8%, before potentially rising to 4% in the last quarter due to an unfavorable base effect.
Analysts project an inflation rate of 2.20% by the end of the current quarter. Long-term projections estimate India's inflation rate to trend around 3.80% in 2026 and 4.00% in 2027.
