Key Takeaways
- September CPI inflation hits 99-month low at 1.54%
- Food inflation turns negative at -2.28%
- Economists predict potential rate cuts in December 2025
India’s headline inflation dropped to a 99-month low of 1.54% in September 2025, marking the lowest reading since June 2017. The Consumer Price Index declined by 53 basis points from August levels, driven primarily by falling food prices.
Food Inflation Turns Negative
The Consumer Food Price Index recorded deflation at -2.28% year-on-year, with rural areas at -2.17% and urban areas at -2.47%. The Ministry of Statistics & Programme Implementation attributed this decline to favorable base effects and reduced prices across vegetables, oils, fruits, pulses, cereals, eggs, and fuel.
Economists’ Analysis
Dipanwita Mazumdar, Economist at Bank of Baroda, noted the benign inflation trajectory supports monetary policy easing. “A favourable food supply, improved sowing, and adequate reservoir levels support further easing,” she said. Vegetable arrivals have surged 13.8% year-on-year compared to last year’s 15.4% decline.
“The CPI inflation eased to a 99-month low 1.5 per cent in September 2025, pulled down by a sharper-than-anticipated disinflation in food and beverages to 1.4 per cent,” said Aditi Nayar, Chief Economist at ICRA.
Nayar highlighted that miscellaneous items inflation jumped to 5.35% due to rising gold and silver prices. ICRA expects CPI inflation to average 2.6% in FY2026 and predicts a possible 25 bps rate cut in December 2025.
“The soft September CPI inflation continues to point towards the persistence of a benign inflationary environment,” said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank.
Bhardwaj expects October inflation could fall below 1% as GST cuts take full effect, creating room for 25-50 basis point rate cuts.
Outlook and Risks
While inflation risks remain tilted downward, economists caution that global energy and metal prices need monitoring due to tariff-related pressures. The overall economic conditions suggest continued supportive policy measures ahead.
