October retail inflation seen to be the lowest in the series

Retail inflation is expected to ease to a record low in October amid lower vegetable prices, positive base effect and GST cuts, which is likely to prompt the Reserve Bank of India to lower inflation expectations for FY26.

Most analysts expect retail inflation, as measured by the CPI, to range at around 0.2% to 0.6% in October, down more than 1.5% in September. Official data on retail inflation will be published on November 12.

The easing of price pressures is also expected to lead the Reserve Bank of India’s Monetary policy Committee to lower its inflation forecast from the current 2.6% fiscal rate. The Monetary Policy Committee is scheduled to meet from December 3-5 and the October CPI inflation data will be the last set of retail inflation estimates released before then. Analysts also expect the MPC to make another rate cut this fiscal year, which could be in either December or February policy.

A Bank of Baroda report pegged CPI inflation in the range of 0.4%-0.6% in October 2025. “Inflation prospects also look benign, supported by tailwinds from GST rate rationalization and lower global commodity prices,” it said. Food price inflation is trending downward largely due to the ongoing contraction witnessed in the vegetable category, specifically tomatoes, onions and potatoes, he said, adding that this in turn is supported by the significant rise in mandi arrivals.

“A similar trend is expected to continue in the coming months as well, with the start of the harvest season. This is likely to impart a significant degree of downward bias to India’s overall inflation outlook,” said the report prepared by Aditi Gupta, economist at Bank of Baroda.

Likewise, Crisil’s Roti Rice Rate (RRR) report noted that the cost of home-cooked vegetarian and non-vegetarian foods in October declined by up to 17% and about 12% year-on-year, respectively, primarily due to a sharp decline in the prices of vegetables and pulses.

Tomato prices fell due to higher imports from western and southern markets, while potato prices fell on an elevated basis. Onion prices fell due to oversupply of stock from the 2024-25 rabi season, before the kharif crop reaches the market from November. The report noted that pulses witnessed corrections in prices as well, supported by an increase in imports of Bengal gram, yellow peas and black gram.

ICRA expects CPI inflation to decline to a low of 0.5% in October 2025, reflecting a deeper contraction in the food and beverage sector as well as the impact of the GST rate cut across many items in the CPI basket. “We expect the MPC to revise its CPI inflation forecast for the second half of FY2026 downward again, when it meets in December 2025, to average FY2026 to around 2.4% from its current forecast of 2.6%,” said Aditi Nayar, chief economist at ICRA.

October CPI inflation is expected to hit a new low due to food deflation and GST cuts, but this is likely to be the lowest level, with inflation expected to rise gradually amid supply risks and easing business activity, said Radhika Rao, executive director and chief economist at DBS Bank.

“We expect October CPI inflation to ease to a new low of 0.2% y/y, the weakest reading in the current series due to continued food price deflation, base effects and the impact of GST cuts. Food price deflation is likely to deepen as high-frequency trends point to a correction in perishable products, pulses, cereals, etc. The deflationary drive from indirect tax relief is likely to be more pronounced as the changes take effect in late September.”

However, she said core inflation may remain flat due to a rise in precious metals, before easing in November, adding that unseasonal rains could impact fresh perishable food supplies in the near term, which, along with higher import duties on selected pulses, reinforces the bank’s view that the bulk of the decline in food inflation is likely behind us.