India’s Retail Inflation Cools To 1.54% In September

The consumer price index or CPI-based inflation was 5.49 per cent in September 2024. “The decline in headline inflation and food inflation during September 2025 is mainly attributed to favourable base effect and decline in inflation of vegetables, oil and fats, fruits, pulses and products, cereal and products, egg, fuel and light,” the National Statistics Office (NSO) said in a statement.

Year-on-year food inflation during September 2025 was (-) 2.28 per cent compared to (-) 0.64 per cent in August and 9.24 per cent in September last year. Food prices have dropped sharply in recent months from last year's high levels driven by a sustained slide in vegetable costs, which have fallen by double digits since April.

In its October bi-monthly monetary policy, the RBI had lowered its inflation projection for 2025-26 to 2.6 per cent from 3.1 per cent estimated in August. “Healthy progress of the south-west monsoon, higher kharif sowing, adequate reservoir levels and comfortable buffer stock of food grains should keep food prices benign,” the RBI had said.

However, economists and analysts in Icra expect that there would be an average inflation rate of 2.6 per cent in this fiscal (FY2026), dampened by the GST rationalisation as well as the continued benign food prices. “Despite the early monsoon onset and abundant rains that supported kharif sowing, large excess rainfall and flooding in some parts of the country in late August 2025 and early September 2025 is expected to have damaged standing crops,” said Aditi Nayar, chief economist, Icra Ltd.

Icra also believes that a final 25 bps rate cut is possible in December 2025. “With its timing contingent on the degree of further transmission of the cumulative 100 bps rate cuts to the credit market, as well as the growth implications of the GST rejig and tariffs. We expect downward revisions in the expected growth trajectory to drive the rate cut decision, rather than the benign CPI inflation outlook, with the latter being driven by tax policy changes and not weaker demand,” Nayar said.

Radhika Rao, executive director and senior economist at DBS Bank said that headline inflation slipped below the RBI’s target band for the second time this quarter, owing to a seasonal correction in perishable food costs, with the segment declining year-on-year. “Vegetables registered a double-digit fall, alongside a sustained moderation in pulses. While excess monsoon might impact production in certain pockets, we don’t expect that sequential impact to derail the ongoing disinflationary trend,” she added.