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Informist, Wednesday, Nov. 12, 2025

 

By Shubham Rana

 

NEW DELHI – Retail inflation fell to a record low in October thanks a favourable base effect, continued fall in food prices, and lower goods and services tax rates. The headline print, however, could have been even lower last month if not for the record high prices of gold and silver.

 

Data released Wednesday showed CPI inflation fell to 0.25% in October from 1.44% in September. At 0.25%, the CPI inflation print is the lowest in the current series, which has data since 2014. Food inflation fell to (-)5.02% in October, the lowest in the current CPI series. Even sequentially, retail prices rose at a much lower pace of 0.2% in October than the average increase of 0.8% during the month in the last 12 years.

 

These numbers are impressive from the Reserve Bank of India's point of view as this will allow the central bank to focus on supporting growth. But the October inflation print would have even lower had it not been for the rise in prices of precious metals.

 

Data and analytical firm Capital Economics estimates gold prices alone added about 60 basis points to headline inflation in October. Excluding gold and silver, CPI inflation was (-)0.6% in October, Gaura Sen Gupta, IDFC FIRST Bank's chief economist, told Informist.

 

Inflation in both gold and silver was at record highs in October. Prices of the two precious metals also saw the biggest sequential jump in October within the CPI. Gold inflation rose to 57.83% in October from 46.99% in the previous month while silver inflation increased to 62.36% from 41.98%. Month on month, gold prices rose 12.5% and silver prices increased 21.7% in October.

 

"We believe, given the current trend, CPI excluding gold would remain negative even in the next two months," Soumya Kanti Ghosh, group chief economic adviser at State Bank of India, said in a report. Gold and silver prices pushed core inflation to 4.4% in October, the joint-highest in over two years, from 4.3% in September. Sen Gupta said that core inflation excluding gold, silver, petrol, and diesel--known as core core inflation--fell to 2.6% in October, a record low.

 

While higher precious metal prices kept headline CPI from turning deflationary in October, GST rate changes, which came into effect on Sept. 22, helped in bringing down the inflation print. The impact of GST rate cuts was visible in segments such as cars, motorcycles, televisions, washing machines, air conditioners, whose prices fell sharply in October, CPI data showed.

 

Sen Gupta said CPI inflation would have been 0.5% in October if not for the GST rate cuts. SBI' Ghosh noted that CPI inflation fell 85 bps in October because of GST rate cuts, higher than the projected 65-75 bps.

 

Economists said the October CPI print does not reflect the full pass-through of the GST rate cuts and a clearer picture will emerge from November, once the pent-up demand and festivity-led spending peters out.

 

"The coming months would give clarity on the extent of pass-through of GST on CPI, as it would also incorporate the frontloading of demand, which has been slightly on withhold in the preliminary months to get clarity on the extent of price reduction of various goods post GST 2.0," Dipanwita Mazumdar, an economist at Bank of Baroda, said in a report.

 

While at a record low, the October inflation data is not easy to decode with several volatile parts. Take for example vegetables, where inflation fell to (-)27.57% last month from (-)21.42% in September. IDFC's Sen Gupta estimates that headline CPI inflation excluding vegetables, gold, and silver fell to 2.1% in October from 2.8% in September.

 

All this suggests that underlying inflationary pressures are well in control. India Ratings and Research estimates that inflation is below 2% in 38.6% of the 299 items in the CPI, the highest in over 6 years.

 

This, economists said, should give the RBI's Monetary Policy Committee space to lower interest rates in December. Many expect the panel, which has cut the repo rate by 100 basis points in 2025, to cut the key rate by another 25 bps in December to 5.25%. However, some economists believe a rate cut in December is contingent more on growth, with September quarter GDP data scheduled to be released on Nov. 28, a week before the MPC's rate decision.

 

"India's CPI inflation trajectory calls for a strong case for decisive actions," SBI's Ghosh said. "The higher growth numbers for Q2 (Jul-Sept) and the October inflation print will pose a serious dilemma for the RBI for a rate action in December."   End

 

Edited by Akul Nishant Akhoury

 

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