Inflation Eases to Record Low of 0.25% in October as Food Prices Decline Further

India’s Inflation Falls to Record Low of 0.25% in October as Food Prices Cool; RBI Trims FY26 Forecast

India’s retail inflation rate dropped sharply to 0.25% in October 2025, marking the lowest reading since the current data series began in 2013, according to the Ministry of Commerce and Industry. The fall, from 1.44% in September, was primarily driven by a broad-based decline in food prices, signaling sustained moderation in price pressures across the economy.

The latest data underscores a strong disinflationary trend that has persisted through the second half of the year, aided by softening global commodity prices, stable domestic supply chains, and a high statistical base.

Food Prices Lead the Decline as Supply Improves

The food index fell sharply to -5.02% in October, compared with -2.3% in September, reflecting the easing prices of key staples and perishables. This marks the ninth consecutive month of food price deflation, which has been central to India’s recent inflation trajectory.

Sequentially, food prices dropped 0.25% month-on-month, while the overall consumer price index (CPI) edged up marginally by 0.15%, indicating that non-food categories contributed modestly to price momentum.

Among food components, cereal inflation declined 0.92%, its lowest level in over four years, aided by improved rabi harvest arrivals and stable procurement trends. The vegetable and pulses categories also witnessed extended deflation, with prices falling for the ninth month in a row, further easing household budget pressures.

The only exception was edible oils, which continued to post double-digit inflation — led by a sharp spike in coconut oil prices, which rose 93% year-on-year, making it the most expensive food item in the index.

“October’s inflation data signals a pronounced easing in food price pressures, supported by adequate supplies, favorable monsoon patterns, and steady import inflows. The moderation in cereals and pulses, along with stabilizing vegetable prices, is particularly encouraging for policymakers,” said an economist at ICICI Securities.

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Core Inflation Shows Mild Uptick in Select Categories

While food prices softened, core inflation, which excludes food and fuel, remained relatively stable but showed mixed trends across sub-categories.

The miscellaneous category, which includes services like transport, communication, recreation, and precious metals, saw inflation rising to a 31-month high of 5.71% in October from 5.35% in September. Within this, the personal care and effects sub-index surged to 23.9%, up from 19.4% in the previous month, driven by higher prices for toiletries, cosmetics, and apparel accessories.

“The rise in discretionary spending categories like personal care reflects a consumption revival post-festive season. However, the overall price stability in core goods continues to support the RBI’s disinflation narrative,” said Dr. Ritu Anand, former Chief Economist at SBI.

Inflation Now Averages 2.22% in FY26; Well Below RBI Target

For the first half of the current fiscal year (April–September FY26), headline inflation has averaged 2.22%, remaining well below the Reserve Bank of India’s medium-term target of 4%. This sustained moderation provides both fiscal and monetary policy comfort, allowing room for accommodative measures if needed to support growth.

The trend has been largely shaped by three key factors — subdued global commodity prices, strong domestic supply management, and base effects from last year’s elevated inflation prints.

The RBI, in its latest monetary policy review, revised its FY26 inflation forecast downward to 2.6% from 3.1%, while reiterating its focus on anchoring inflation expectations and preserving macroeconomic stability.

“The continued easing in inflation reinforces India’s price stability narrative. However, the RBI remains vigilant to potential risks from global food and energy shocks, especially in the wake of volatile crude oil prices and El Niño-linked weather disruptions,” the central bank noted in its policy statement.

Monetary Policy Implications: Room for a Softer Stance Ahead

The sharp fall in inflation strengthens the case for a potential monetary policy pivot in the coming quarters. While the RBI has maintained a neutral stance, economists suggest that a sustained moderation in price pressures could open the door for measured rate adjustments to boost private consumption and investment.

“If inflation remains below 3% for two consecutive quarters, we could see the RBI signaling a softer tone in its guidance by Q4 FY26,” said an analyst at Nomura India. “However, policymakers will likely weigh this against external headwinds and capital flow volatility before making any move.”

Impact on Economy and Consumers

For consumers, the easing of inflation translates into greater purchasing power, particularly for households that had faced elevated food and fuel costs over the past two years. Rural households are expected to benefit the most, as food expenditure accounts for nearly 50% of their total consumption basket.

From a macroeconomic standpoint, low inflation also improves real income growth, reduces input cost pressures for industries, and enhances corporate profit margins, especially in sectors like FMCG, textiles, and consumer durables.

“This disinflationary phase offers a significant tailwind for India’s growth story,” said a report by HDFC Securities. “It supports consumption-led recovery, strengthens real yields, and boosts investor confidence at a time when the global outlook remains uncertain.”

Global Comparison: India Among the Best-Performing Emerging Markets

India’s latest inflation print makes it one of the best-performing large emerging economies in terms of price stability. In contrast, inflation in major emerging peers such as Brazil (3.7%), Indonesia (2.9%), and South Africa (4.5%) remains notably higher.

This relative stability reinforces India’s attractiveness for foreign investors, who view consistent inflation control as a sign of macroeconomic discipline and policy credibility.

Outlook: Inflation Expected to Stay Benign, but Vigilance Key

Looking ahead, economists expect inflation to remain below 3% for the rest of FY26, barring any external shocks. Stable food supplies, low global commodity prices, and strong domestic production are expected to keep price pressures in check.

However, analysts caution that volatility in crude oil prices, unexpected weather events, or renewed geopolitical tensions could temporarily disrupt the disinflationary trend.

“The key will be maintaining supply-side resilience and ensuring food security measures continue to work efficiently. The RBI’s cautious optimism is justified given the external uncertainties,” said an economist at Axis Bank.

Conclusion

India’s record-low inflation of 0.25% in October highlights the economy’s remarkable price stability and robust supply dynamics. With the RBI lowering its inflation forecast to 2.6%, the focus now shifts toward sustaining growth momentum while safeguarding against global risks.

The combination of stable prices, resilient demand, and strong macro fundamentals positions India favorably among emerging markets, reinforcing its potential as a leading engine of global economic growth in FY26 and beyond.

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