India's Consumer Price Index (CPI)-based retail inflation fell to 1.54% (year-on-year) in September 2025, the lowest in 99 months (since June 2017). This marks only the second instance in FY 2025-26 when inflation dropped below the RBI's comfort band of 2-6%. The decline was driven by food price deflation: vegetable prices fell 21% and pulses declined 15% year-on-year. The Consumer Food Price Index (CFPI) recorded a fall of over 2%. Bumper harvests, better monsoon distribution, government buffer stock releases, and export curbs on onions contributed to easing food prices. However, core inflation (excluding food, beverages, fuel, and light) rose from 4.2% in August to 4.6% in September, indicating sustained demand-side pressures.
India's Retail Inflation Hits 8-Year Low at 1.54% in September 2025
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India's Consumer Price Index (CPI)-based retail inflation fell to 1.54% (year-on-year) in September 2025, the lowest in 99 months (since June 2017). This marks only the second instance in FY 2025-26 when inflation dropped below the RBI's comfort band of 2-6%. The decline was driven by food price deflation: vegetable prices fell 21% and pulses declined 15% year-on-year. The Consumer Food Price Index (CFPI) recorded a fall of over 2%. Bumper harvests, better monsoon distribution, government buffer stock releases, and export curbs on onions contributed to easing food prices. However, core inflation (excluding food, beverages, fuel, and light) rose from 4.2% in August to 4.6% in September, indicating sustained demand-side pressures.
Key facts
- India's CPI retail inflation fell to 1.54% in September 2025 — the lowest in 99 months.
- This is only the second time in FY 2025-26 that inflation dropped below RBI's 2-6% target band.
- Vegetable prices fell 21% and pulses declined 15% year-on-year driving the decline.
- Bumper harvests, better monsoon distribution, and export curbs on onions eased food prices.
- Core inflation excluding food and fuel rose from 4.2% to 4.6% indicating demand-side pressures.
- The Consumer Food Price Index recorded a fall of over 2% year-on-year.
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India's Consumer Price Index (CPI)-based retail inflation of 1.54% in September 2025 was the lowest in how many months?
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India's CPI-based retail inflation fell to 1.54% year-on-year in September 2025 — the lowest in 99 months (since June 2017). Food deflation was driven by vegetable prices falling 21% and pulses declining 15% year-on-year, with CFPI recording a fall of over 2%.
Source: PIB / Trading Economics
Frequently asked questions
What is Consumer Price Index (CPI) inflation and how is it measured in India?
Consumer Price Index (CPI) inflation measures the percentage change in the prices of a representative basket of goods and services consumed by households over a period, typically year-on-year. In India, the Ministry of Statistics and Programme Implementation (MoSPI) releases CPI data monthly. The basket includes food (45.86% weight), housing, clothing, fuel, and miscellaneous items. CPI is the headline inflation measure used by the RBI for monetary policy decisions.
Why did India's retail inflation fall to a 99-month low of 1.54% in September 2025?
The fall was primarily driven by food price deflation: vegetable prices declined 21% and pulses fell 15% year-on-year. These declines were caused by bumper harvests resulting from well-distributed monsoon rainfall, release of government buffer stocks, and export curbs on onions. Since food has a 45.86% weight in India's CPI basket, sharp food price falls have an outsized impact on headline inflation.
What is the RBI's inflation target and what is the significance of inflation falling below 2%?
The Reserve Bank of India (RBI) has a flexible inflation targeting framework with a medium-term target of 4% CPI inflation, within a tolerance band of 2-6%. When inflation falls below 2% (the lower bound), it raises concerns about deflationary pressure — where falling prices can reduce business revenues, suppress investment, and slow GDP growth. The September 2025 reading of 1.54% was only the second time in FY 2025-26 that inflation breached the lower bound.
What is core inflation and why did it rise even as headline inflation fell in September 2025?
Core inflation measures price changes excluding volatile food and fuel components, reflecting underlying demand-side pressures in the economy. In September 2025, core inflation rose from 4.2% to 4.6% even as headline CPI fell to 1.54%. This divergence indicates that while food prices fell due to supply-side factors, non-food consumer demand remained robust, pointing to healthy economic momentum and potential for RBI to maintain interest rates rather than aggressively cutting them.
What policy implications does low retail inflation have for the RBI's monetary policy?
Low headline inflation (1.54%) provides the RBI Monetary Policy Committee (MPC) room to consider rate cuts to stimulate growth. However, elevated core inflation (4.6%) and the transient nature of food price deflation — which can reverse if monsoon distribution worsens — suggest the RBI will be cautious. The MPC typically looks at the durability and source of disinflation before adjusting the repo rate, which was at 6.25% in early 2026.
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