Retail inflation falls to multi-year low near 0.5% in October

India’s retail inflation rate is expected to have fallen sharply in October, reaching its lowest point in more than 10 years, according to several surveys of economists.

A Reuters poll of 42 economists estimated the Consumer Price Index (CPI) inflation at 0.48%, down from 1.54% in September. This would mark the lowest inflation reading in the current 2012-base series, which began in January 2015.

The range of estimates ran from -0.21% to 2.10%, underscoring how steeply prices have moderated.

Retail inflation drop driven by food prices, GST cuts

Economists attribute the drop to a sustained fall in food prices—particularly vegetables, pulses and edible oils—and the favourable base effect from high inflation during the same month last year.

Late-September cuts to Goods and Services Tax (GST) rates on several essential goods also helped ease retail prices, while weaker demand in some categories contributed to slower price growth.

The Financial Express and Mint polls similarly forecast inflation in the range of 0.3 to 0.5%, calling it a “series low” in India’s retail inflation data.

Core inflation softens too

Core inflation, which excludes volatile food and fuel components, is estimated to have eased to around 4.3%, down from 4.5% in September.

Wholesale inflation is also likely to have remained subdued, with the Wholesale Price Index (WPI) expected to record a year-on-year decline of about 0.6%.

Food inflation holds the key

Food items make up nearly half of India’s CPI basket. Their recent downward trajectory has been driven by plentiful vegetable supplies and lower pulse prices, despite unseasonal rainfall in parts of the country.

However, analysts warn that this disinflationary phase may prove temporary. Any disruption in agricultural supply chains or new import-duty hikes on pulses could push prices higher again in the coming months.

Policy outlook for Reserve Bank of India

The sharp moderation in inflation gives the Reserve Bank of India (RBI) more flexibility in its monetary policy stance. Economists say the central bank could consider rate cuts if the low-inflation trend sustains, though RBI officials have cautioned that underlying price pressures remain.

Analysts at BofA Securities said the impact of the favourable base effect is likely to diminish in the coming months and warned that “supply-side risks are becoming more visible”.

Outlook remains cautiously positive

While the October reading offers comfort to consumers and policymakers alike, economists note that India rarely sustains inflation below 1% for long periods.

A poor winter harvest, renewed global commodity price shocks or domestic supply disruptions could quickly reverse the current trend.

For now, the data suggest a period of unusual price stability—a respite that may prove temporary as the next cycle of inflationary pressures builds up.