Retail inflation slips to 8-year low of 1.54% in September
What's the story
India's retail inflation fell to a multi-year low of 1.54% in September, down from August's two-month high of 2.07%. The last time the country saw such low inflation was in June 2017. The decline is mainly due to a sharp drop in food and beverage prices, which have seen a disinflationary trend.
Inflation trends
Food inflation at 81-month low
The Consumer Price Index (CPI) inflation rate for September stood at 1.54%, with food and beverages contributing significantly to this decline. The food inflation rate fell to an 81-month low of -2.28%. However, other categories such as miscellaneous items saw a rise in year-on-year (YoY) inflation rates, with gold and silver prices hitting new highs in October.
Forecast adjustment
RBI lowers inflation forecast
Earlier this month, the Reserve Bank of India (RBI) lowered its inflation forecast for FY26 to 2.6% from an earlier estimate of 3.1%. The cut was based on better-than-expected supply conditions and easing cost pressures. With inflation well below RBI's medium-term target of 4%, analysts expect policymakers to focus on supporting growth rather than curbing price rises with rate hikes.
Price control
GST rate rationalization to impact CPI basket
The recently implemented Goods and Services Tax (GST) rate rationalization is expected to bring down prices of several items in the CPI basket. An earlier analysis by Moneycontrol found that the GST cut could impact at least 14% of the inflation basket. This suggests that price pressure is likely to remain subdued in the coming months, further contributing to the disinflationary trend.