India’s retail inflation fell to a historic low of 0.25 percent in October, sharply down from 1.44 percent in September, as food prices continued to decline and a favourable base effect kicked in. The latest reading is well below the Reserve Bank of India’s (RBI) lower tolerance limit of 2 percent and far short of its inflation projection of 1.8 percent for the October–December quarter.
This marks the third time in four months that inflation, as measured by the Consumer Price Index (CPI), has stayed below the RBI’s target band of 2–6 percent. Analysts believe inflation has now bottomed out and is likely to inch up in the coming months as the statistical base effect wears off.
“October’s number reflects an exceptional low driven by the food component. But this is unlikely to sustain beyond November as food prices tend to firm up during the winter and festival seasons,” said an economist with a leading private bank.
Food prices, which make up nearly 40 percent of the CPI basket, saw deflation deepening to -5.02 percent in October from -2.33 percent in September. Vegetables and pulses were the biggest drivers: vegetable prices fell 27.6 percent year-on-year, while pulses declined 16.1 percent.
However, inflation in gold soared to 57.83 percent in October from 46.99 percent a month earlier, reflecting global price volatility and strong domestic demand ahead of the festive season. Economists cautioned that persistently high gold inflation could spill over into core inflation, which excludes food and fuel.
The sharp undershoot poses a challenge for the RBI’s inflation management framework, which is aimed at maintaining price stability without stifling growth. While the central bank had forecast a gradual pick-up in inflation to 4 percent in January–March and 4.5 percent in April–June 2026, October’s print suggests the near-term trajectory may remain below target.
For the Indian consumer, the drop in inflation comes as a temporary relief, particularly after months of high prices for essentials like pulses, cereals, and vegetables earlier this year. But for farmers, deflation in food prices could mean lower realisations, raising concerns about rural incomes and demand recovery.
Economists also noted that a sustained period of very low inflation might push the RBI to revisit its growth–inflation balance, though most do not expect an immediate rate cut. “The central bank will likely stay cautious, given that inflation is expected to climb again once the base effect fades,” said another analyst.
October’s record-low inflation print reflects a statistical anomaly rather than a structural shift. Unless food prices remain unusually soft, inflation is expected to return towards the RBI’s comfort zone in the next quarter.