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India’s retail inflation eased to a ten-year low of 0.25% in October, down from 1.54% in September, driven by a steep decline in food prices. This marks the fourth consecutive month of inflation staying below the RBI’s 4% target and the seventh month below its 6% ceiling. Food inflation fell sharply to -5.02%, with vegetable prices declining for six straight months. The RBI expects inflation to remain subdued in FY26 at 2.6%, supported by lower GST rates and improved supply conditions. However, it warned of potential risks from global geopolitical tensions and trade disruptions.

Key Highlights

* Retail inflation dropped to 0.25%, the lowest in a decade.

* Food inflation plunged to -5.02%, led by lower vegetable prices.

* Inflation has stayed below the RBI’s 4% target for four months.

* RBI projects FY26 inflation at 2.6%, down from 3.1%.

* Policy easing likely, with RBI eyeing another rate cut next month.

India’s retail inflation slowed dramatically to a decade-low of 0.25% in October, down from 1.54% in September, as food prices continued to ease. This marks the fourth straight month that inflation has remained below the Reserve Bank of India’s (RBI) medium-term target of 4% and the seventh month under its upper tolerance band of 6%.

According to official data, food inflation, which makes up nearly half of the Consumer Price Index (CPI) basket, fell to -5.02% from -2.28% in September. The decline was driven by sustained drops in the prices of vegetables, oils, fruits, eggs, cereals, footwear, and transport services, alongside the continued impact of GST rate cuts and a favourable base effect. Vegetable prices alone have fallen by double digits for six consecutive months.

While headline inflation remains subdued, economists note that changing household consumption patterns—with food forming a smaller share of spending—are influencing CPI trends. The Household Consumption Expenditure Survey 2023-24 highlighted this structural shift in spending.

In its latest Monetary Policy Committee (MPC) meeting, the RBI maintained policy rates but hinted at further easing to support growth, citing a benign inflation backdrop. The central bank now projects FY26 inflation at 2.6%, well below its earlier forecast of 3.1%. Quarter-wise, inflation is expected at 1.8% in Q2 and Q3, rising to 4% in Q4 and 4.5% in Q1 FY27.

RBI Governor Sanjay Malhotra stated that the “overall inflation outlook has turned even more benign” due to falling food prices and GST rationalisation. However, he cautioned that geopolitical risks and trade disruptions could still impact the price trajectory.

Finally, with inflation hitting a decade low and food prices easing, India’s monetary policy outlook brightens, allowing the RBI greater room to support economic growth through rate cuts.

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