India’s annual retail inflation slowed to 1.54% in September, marking its lowest level in eight years, as food prices eased, according to government data released on Monday.
The reading compares with 2.07% in August and was below a Reuters poll estimate of 1.7%.
The government said this was the lowest retail inflation figure since June 2017.
InflationMeasureSept, 2025 (Prov.) — RuralUrbanCombd.August, 2025 (Final) — RuralUrbanCombd.Sept, 2024 — RuralUrbanCombd.InflationCPI (General)1.072.041.541.692.472.075.875.055.49CFPI-2.17-2.47-2.28-0.70-0.53-0.649.089.569.24
This is the second time in three months that inflation has fallen below the Reserve Bank of India’s tolerance band of 2%–6%, after briefly dipping under 2% in July.
The RBI is mandated to ensure inflation stays within that range and not exceed it for more than three consecutive quarters.
Food prices lead the decline
The sharp moderation in headline inflation was largely driven by falling food prices.
Food inflation fell 2.28% year-on-year in September, compared with a revised 0.64% decline in August.
Vegetable prices dropped 21.38% after falling 15.92% in the previous month.
The government attributed the fall in headline and food inflation to a favourable base effect and declines across several categories, including vegetables, oils and fats, fruits, pulses, cereals, eggs, and fuel and light.
Rural and urban trends
Inflation eased across both rural and urban areas. Rural headline inflation stood at a provisional 1.07% in September, down from 1.69% in August.
Food inflation in rural areas was recorded at -2.17% in September, compared with -0.70% a month earlier.
Urban headline inflation fell to a provisional 2.04% in September from 2.47% in August.
Food inflation in cities also declined, moving from -0.53% in August to -2.47% in September.
RBI outlook and policy stance
The Reserve Bank of India, in its October monetary policy review, kept the policy rate unchanged at 5.5% but hinted at the possibility of a rate cut in December.
Softer food prices prompted the central bank to lower its inflation forecast for the ongoing financial year to 2.6% from 3.1%.
The central bank has already reduced interest rates by 100 basis points this year and raised its growth projection to 6.8% from 6.5%, aligning with the upper end of the government’s 6.3%–6.8% estimate.
The government’s recent tax cuts on items ranging from soaps to cars are expected to cushion the economy from the impact of newly imposed US tariffs of up to 50% on Indian goods.
These measures are anticipated to support consumption during the September–December festival season while keeping inflation pressures subdued.
At the current pace, India remains on track to maintain its position as the fastest-growing major economy globally.
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