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Retail inflation in India fell to a record low of 0.25 per cent in October, mainly due to GST rate cuts implemented in late September. Experts from SBI, Crisil, ICRA, and CareEdge highlighted that inflation excluding gold is already negative and likely to remain so in the coming months. The sharp moderation in CPI inflation could influence the Reserve Bank of India's policy decisions in December. While economic growth remains strong, softer inflation readings give the RBI room to consider a repo rate cut to support the economy amid ongoing external uncertainties.
Retail inflation in India dropped sharply to 0.25 per cent in October, marking a record low, largely driven by recent GST rate cuts, experts say. This decline of 85 basis points compared to previous levels is expected to continue in the coming months. The Consumer Price Index (CPI)-based inflation reached its lowest in the current series, which has tracked data since January 2014. Advertisement
SBI's research report noted that CPI inflation for personal care and related items rose to 57.8 per cent due to higher gold prices. Excluding gold, however, headline CPI actually recorded a negative growth of -0.57 per cent year-on-year. The report highlighted that CPI excluding gold is likely to remain in negative territory over the next two months.
GST rationalisation, implemented from late September, contributed significantly to this reduction in CPI inflation. Analysts pointed out that the decline was even greater than initially estimated, with GST contributing around 85 basis points of moderation instead of the earlier forecast of 65-75 bps.
The report emphasized that the current inflation trend poses a challenge for the Reserve Bank of India (RBI) ahead of its monetary policy review in December. While the economy showed strong growth in the second quarter, the soft inflation numbers could make a rate cut in December a close decision rather than a certainty. The RBI's Monetary Policy Committee (MPC) is scheduled to meet from December 3-5, 2025.
Crisil's Principal Economist, Dipti Deshpande, noted that October was the first full month reflecting the benefits of lower GST rates on mass consumption goods. She added that non-food categories are likely to see more pronounced inflation benefits than food items, even though food accounts for a larger share of the overall CPI. Deshpande also expects a possible repo rate cut in the upcoming review.
Rajeev Juneja, President of PHDCCI, said that the government's GST reforms are showing a positive impact on the economy through softer headline inflation, and suggested that further benefits could come from investing in infrastructure, strengthening agriculture supply chains, and boosting productivity through technology in manufacturing and services.
ICRA's Chief Economist, Aditi Nayar, stated that the RBI is likely to revise down its CPI inflation projection for FY26 from 2.6 per cent, reflecting soft food price trends and the impact of GST rationalisation. This, along with the dovish stance of the October policy, could support a 25-bps rate cut in December, unless GDP growth surprises on the upside.
CareEdge Ratings' Chief Economist, Rajani Sinha, said that the GST rationalisation's impact was clearly seen in October's inflation data. She noted that moderating inflation allows the RBI more flexibility to support growth, particularly amid external challenges and uncertainties in US trade negotiations. If growth slows in the second half of FY26, the lower inflation could create scope for a policy rate cut.
Source PTI
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