India’s retail inflation hit its lowest in over eight years in September, dropping to 1.54%. This decrease was driven largely by falling food prices. This is the lowest level since June 2017 and comes slightly above market expectations of 1.50%.

Food inflation remained in negative territory for the fourth consecutive month, at -2.28%, compared to -0.69% in August. Key staples saw sharp declines, with vegetable prices down 21.38% and pulses down 15.32%.

Rural inflation eased to 1.07% from 1.69% in August. Meanwhile, urban inflation fell to 2.04% from 2.47%. Fuel and light costs rose modestly to 1.98%. Housing inflation increased to 3.98%, and clothing and footwear inflation edged lower to 2.28%. Core inflation, which excludes food and fuel, rose to 4.5%. This is the highest since September 2023.

The Reserve Bank of India (RBI), in its October bi-monthly policy, lowered its inflation forecast for 2025-26 to 2.6%. Previously, it was 3.1% in its August policy. The RBI expects the south-west monsoon, strong kharif sowing, adequate reservoir levels, and sufficient food grain stocks to keep food prices stable in the coming months.

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