India's retail inflation, measured by the Consumer Price Index (CPI), dropped to a record low of 0.25% in October, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Wednesday. This figure marks the lowest inflation rate since at least 2012 and stands significantly below Bloomberg's estimate of 4%.
The sharp decline is largely attributed to a high base effect from last year's elevated food prices and the recent GST rate cuts, which made household goods more affordable. The government noted that "the decline in headline inflation and food inflation is mainly attributed to the full month's impact of the GST rate reductions that came into effect on September 22."
Food inflation witnessed a notable drop, with prices falling 5.02% year-on-year in October, compared to a revised fall of 2.33% in September. The decline was led by a steep 27.57% fall in vegetable prices, extending from a 21.38% decrease in the previous month.
Experts believe that the current moderation in prices may be temporary. The Reserve Bank of India (RBI) has projected retail inflation to rebound to around 4% in the next quarter, as the base effects fade and seasonal factors influence food prices.
The combination of lower inflation and reduced GST rates is expected to boost consumer sentiment and purchasing power in the short term, especially in the household and food segments. However, policymakers remain cautious about the sustainability of this trend amid potential supply-side fluctuations.
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