NEW DELHI: Retail inflation fell sharply to a 99-month low of 1.54% in September 2025, according to provisional data released by the Ministry of Statistics & Programme Implementation (MoSPI) on Monday. This marks the lowest year-on-year inflation rate since June 2017, and a drop of 53 basis points from 2.07% recorded in August.
The decline was primarily driven by a sharp correction in food prices. Food and beverage inflation eased to 1.4% — the lowest in 81 months — offsetting sequential upticks in other categories. Inflation for miscellaneous items rose to 5.35%, mainly reflecting higher prices of gold and silver.
The Consumer Food Price Index (CFPI) registered a year-on-year inflation rate of -2.28% in September — the fourth consecutive month of negative food inflation and the lowest since December 2018.
Analysts attributed the fall to a favourable base effect and price corrections across key food categories including vegetables, oils and fats, fruits, pulses, cereals, eggs, and fuel and light. Food inflation alone fell 164 basis points compared to August.
Price pressures cooled more significantly in rural India, where headline inflation dropped to 1.07% from 1.69% in August. Urban inflation also eased to 2.04% from 2.47% a month ago. Food inflation was negative across both segments — -2.17% in rural areas and -2.47% in urban areas.
Inflation in housing for the urban sector rose to 3.98% from 3.09% in August, while inflation in essential services showed moderation: health at 4.34%, education at 3.44%, and transport and communication at 1.82%. The fuel and light segment recorded an inflation rate of 1.98%.
Rating agency ICRA expects CPI inflation to average 2.6% in FY2026, aided by GST rationalisation and benign food prices.
The agency believes the Reserve Bank of India (RBI) may deliver one final 25-basis-point rate cut in December 2025, contingent on the extent of monetary transmission from the 100 bps of cumulative cuts already implemented, and the impact of GST restructuring and tariff changes on growth.
“The expected rate cut would likely be driven more by revisions in the growth outlook than by low inflation readings, which are being shaped largely by tax policy changes rather than weakening demand,” ICRA said.