India CPI Preview: Disinflation Deepens: October CPI Forecast at 1.1%
We forecast October CPI at 1.1% yr/yr, with risks tilted to the downside. The disinflationary trend is broad-based, but unlikely to last into early 2026. RBI still has room to cut, but may prefer to assess the durability of food price softness before moving
India’s headline consumer inflation is likely to plunge to just 1.1% yr/yr in October 2025, marking one of the lowest CPI prints in over a decade, driven by a sustained decline in food prices, base effects, and indirect tax adjustments. If realised, this would represent a continuation of the disinflationary trend that began in mid-2025 and bring the CPI further below the Reserve Bank of India’s (RBI) medium-term 4% target.
We forecast headline CPI inflation to fall from 1.54% in September to 1.1% in October, reflecting both statistical and real-economy drivers. First, the base effect is highly favourable—October 2024 had recorded a sharp surge in vegetable prices, especially tomatoes, due to weather-induced supply shocks. This year, those effects are absent. In fact, vegetable prices have posted double-digit annual declines for six straight months, exerting significant downward pressure on overall food inflation, which makes up nearly half the CPI basket. In addition to base effects, the cut in the Goods and Services Tax (GST) on select consumer items—effective from late September—has started filtering into retail prices and further softened inflationary pressures. While the full pass-through of GST cuts may take another month, early indications suggest a dampening effect on core inflation.
That said, this may represent the cyclical trough for inflation. While food inflation has driven the recent trend, emerging upside risks from unseasonal rainfall and higher import duties on pulses could begin to reverse some of the gains, especially as we head into the winter cropping and procurement season. Weather disruptions and tighter trade policies may constrain supply and push food prices higher in Q4 FY26.
From a policy standpoint, the inflation outlook strengthens the case for another RBI rate cut in December, particularly in light of India’s robust Q1 FY26 GDP growth (7.8% yr/yr). However, the central bank may prefer to tread cautiously, especially with the new CPI base year and basket revision (from 2012 to 2024) expected early next year, which could alter the measured weight of food and other categories.