India’s retail inflation eased sharply to 1.54% in September 2025, the lowest since June 2017, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI). The decline reflects a continued fall in food prices, which remained in negative territory for the fourth consecutive month.
The inflation data, based on the All-India Consumer Price Index (CPI), shows a 53-basis-point fall from 2.07% in August, indicating a broad-based softening in price pressures across most consumption categories. The moderation has taken overall inflation below the Reserve Bank of India’s lower tolerance limit of 2–6%.
The Consumer Food Price Index (CFPI) recorded a deflation of –2.28% year-on-year, compared with –0.64% in August, signalling a deeper fall in food prices. Rural food inflation stood at –2.17%, while urban food inflation registered –2.47%.
According to the release, the decline in headline and food inflation was driven by a favourable base effect and lower prices of vegetables, edible oils, fruits, pulses, cereals, eggs, and fuel and light items. The September food inflation figure is the lowest since December 2018.
Vegetable prices fell by 21.38% on a year-on-year basis, while pulses declined by 15.32%, leading the drop in the food basket.
Headline inflation in rural areas fell to 1.07% in September from 1.69% in August, while in urban regions, it eased to 2.04%, compared with 2.47% a month earlier.
The data shows that both rural and urban India benefited from easing food prices, although the rural sector saw a sharper moderation in price pressures.
Among other CPI components, housing inflation rose to 3.98% in September from 3.09% in August. Education inflation edged lower to 3.44% from 3.60%, while health inflation eased slightly to 4.34% compared with 4.40% a month earlier.
Transport and communication inflation softened to 1.82% from 1.94%, and fuel and light inflation declined to 1.98% from 2.32%.
Core inflation (excluding food and fuel) stood at 4.5%, reflecting modest upward pressure from non-food sectors, including jewellery and discretionary items influenced by rising gold prices.
While national inflation has cooled to an eight-year low, Kerala figures among the top five major states with higher year-on-year inflation in September, as per the MoSPI data.
Economists attribute this divergence to Kerala’s structural cost composition, including its dependence on imported food commodities, higher logistics and transportation expenses, and robust consumer spending on gold, housing and services.
Retail analysts note that price transmission in Kerala often lags the national average because of supply-chain dependencies and consumption patterns that differ from the rest of the country.
Despite easing vegetable and edible-oil prices, core costs—notably in housing, healthcare and services—have kept the state’s inflation above the national mean. The trend highlights the uneven nature of price moderation across states, even as overall inflation remains subdued.
Analysts expect inflation to remain moderate over the coming months, supported by low global crude oil prices, strong agricultural output, and the impact of GST rationalisation on retail prices.
“Inflation is expected to remain benign on the back of low crude prices and the impact of GST reforms on household goods,” said Dharmakirti Joshi, Chief Economist at Crisil.
With inflation now well below the RBI’s 2–6% target band, economists believe the data could influence the Monetary Policy Committee’s future stance. Policymakers, however, are expected to watch for any rebound in food prices during the festival and post-monsoon period before adjusting interest rates.
