Retail inflation in India, measured by the Consumer Price Index (CPI), moderated significantly in September 2025, easing to 1.54% from 2.07% in August, according to official government data released on October 13. This marks the lowest inflation level since June 2017.
The reading was slightly above the CNBC-TV18 poll estimate of 1.50%, reflecting a pleasantly surprising trend for policymakers and households alike. For context, CPI was 5.49% in September 2024, highlighting the sharp moderation in inflation over the past year.
Food Prices Remain the Key Driver
The moderation in retail inflation was largely driven by continued softness in food prices, with food inflation remaining negative for the fourth consecutive month. Food prices fell by (-)2.28% in September, compared to (-)0.69% in August and 9.24% in September 2024.
Among specific food items, vegetable inflation declined further to (-)21.38% from (-)15.92%, and pulses inflation eased to (-)15.32% from (-)14.53%.
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Rural and Urban Inflation Trends
Both rural and urban inflation showed moderation. Rural inflation fell to 1.07% from 1.69%, while urban inflation dropped to 2.04% from 2.47%.
Other components of inflation showed mixed trends:
Fuel and light inflation eased to 1.98% from 2.32%
Housing inflation rose to 3.98% from 3.09%
Clothing and footwear inflation slightly declined to 2.28% from 2.33%
Meanwhile, core inflation, which excludes food and fuel, climbed to 4.5% in September from 4.1% in August, marking its highest level since September 2023.
Expert Views on Inflation Trends
Aditi Nayar, Chief Economist at ICRA, noted:
“The September print has been a pleasant surprise, mainly due to deeper-than-expected food disinflation. While some sectors like housing and miscellaneous items saw a sequential uptick, overall moderation is visible. October inflation may fall to 0.5% or below, before an uptrend resumes later in the year.”
Madhavi Arora, Chief Economist at Emkay Global Financial Services, added:
“With GST cuts being felt in October and favorable mandi data, we may see headline CPI inflation dropping below 0.5%. Core inflation could also fall by over 100 basis points, providing relief for households in the near term.”
RBI’s Inflation Outlook
In its October bi-monthly monetary policy, the Reserve Bank of India (RBI) lowered its inflation projection for FY26 to 2.6% from 3.1% estimated in August. The RBI highlighted that healthy south-west monsoon progress, higher kharif sowing, adequate reservoir levels, and comfortable buffer stocks should keep food prices benign in the second half of the fiscal year.
Key Takeaways
Retail inflation eased to 1.54% in September 2025, the lowest since June 2017
Food inflation remained negative for the fourth month, helping pull down headline CPI
Rural and urban inflation moderated, while core inflation rose to 4.5%
Experts expect October inflation to dip further, supported by GST cuts and food price stability
RBI projects FY26 inflation at 2.6%, signaling manageable inflation for policymakers
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