The headline retail inflation for October is estimated to have fallen to a record low in current Consumer Price Index (CPI) series primarily due to the continued fall in food prices, high-base and the impact of Goods and Services Tax (GST) rate cuts, economists said.
The CPI inflation is estimated to plunge to around 0.5% in October from 1.54% in September, given the median of an FE poll of economists.
This would mean the key inflation figure might have stayed below the Reserve Bank of India’s medium-term target of 4% for the ninth consecutive month and below the lower end of the central bank’s target range of 2-6% for the third time in four months. Economists said October is likely to mark the trough in the current disinflation cycle.
At 0.5%, it would be the lowest print in the current CPI series, with 2012 as the base year. The previous lowest inflation print in the current series was 1.46% in June 2017. The government is set to change the base year of the CPI early next year to 2024.
The October CPI estimates reflect strong favourable base-effects and lower food prices, IDFC First Bank Chief Economist Gaura Sen Gupta said. Daily food prices indicate continued month-on-month decline in vegetable prices, as reflected by both National Horticulture Board (NHB) and the Department of Consumer Affairs, Sen Gupta said. The headline CPI in October 2024 was 6.21% driven by a spike in vegetable prices amid supply disruptions and unseasonal weather. This creates a high base that statistically pulls down the 2025 year-over-year comparison, even if current prices are stable or modestly declining.
Radhika Rao, senior economist at DBS Bank, said food disinflation is likely to deepen as high-frequency trends point to a correction in perishables, pulses, cereals etc. She pointed that unseasonal rains might impinge on the supply of fresh food perishables in the near-term, which alongside an increase in import duties on selected pulses, reinforces our view that the bulk of the disinflation in food is likely behind us.
The economists projected food inflation in the range of (-)2.5% to (-)3.7% in October. Food’s 46% weight in the CPI basket makes it a dominant factor. The estimates for October retail inflation range from 0.2% to 0.8% in a poll of six economists. The Ministry of Statistics and Programme Implementation will release the CPI figures for October on Wednesday.
The economists expect the inflation to remain benign for next few months in view of the GST rate rationalisation. Aditi Naiyar of ICRA India expected the monetary policy committee (MPC) of the RBI to revise its CPI inflation projections for the second of half of FY2026 downwards once again, when it meets in December, taking the average for FY26 to 2.4% from its current forecast of 2.6%.
Most of the economists projected that the impact of GST rate cut is likely to be more apparent in October-November. The government announced GST rate rationalisation on September 3 eliminating the 12% and 28% slabs and introducing a special rate of 40% for luxury and sin goods. The changes took effect on September 22.
The core inflation, which excludes food and fuel components from the basket, is projected at 4.3% in October. Economists said core inflation might stay firm on higher precious metals prices before easing in November. “Gold prices continue to exert upward pressure on core inflation,” Sen Gupta said.
Rao pointed out that October is likely to mark the trough in the current cycle, with base effects expected to see inflation resume its gradual climb in the subsequent months.
