The Consumer Price Index (CPI), which measures consumer prices, saw the lowest annual rise on record for the current series in October 2025 at just 0.25 %, a significant shift for the Indian economy. The sharp drop is attributed to a full-month effect of lower tax rates under the Goods and Services Tax (GST) system, as well as a positive base effect from last year’s high inflation. Headline inflation even fell to negative levels in rural India, which was an unprecedented event. In the meanwhile, urban inflation was 0.88%. With potential effects on monetary policy and consumer behavior, these data illustrate how both external variables and policy are reshaping the price environment in India.
A Brief Overview of the Event’s Data
Data published by the Ministry of Statistics and Programme Implementation (MoSPI) indicates that combined national CPI inflation for October 2025 was 0.25% year-on-year, which is a decrease from the updated 1.44% recorded in September.
At -5.02%, food inflation was the lowest since the start of the current CPI series.
Headline inflation was -0.25% in rural areas and 0.88% in metropolitan regions.
The significant decline is due to three main causes: the complete month’s influence of the GST rate decrease (which went into effect on September 22, 2025), the base effect of high inflation a year ago, and deflation in food prices (notably in vegetables, oils & fats, fruits, and eggs). In terms of sectors, housing inflation remained at 2.96% (urban only), education inflation increased slightly to 3.49%, health inflation decreased to 3.86%, transport & communication inflation fell to 0.94%, and fuel & light inflation remained at about 1.98%.
Although economists see this as a welcome respite from inflationary pressures, they also warn that core inflation—excluding food and fuel—is still a problem at roughly 4.4%.
Key Highlights & Analysis
1. The Effect of a Policy-Driven GST
With effect from September 22, 2025, the government’s choice to consolidate and decrease GST slabs—effectively merging numerous tax levels into primarily 5% and 18% (with a 40% demerit rate)—entered into force.
By decreasing tax rates on basic consumer items, this decrease contributed to mitigating retail price increases. The “full-month impact of decline in GST” was directly stated by MoSPI as a factor contributing to October’s inflation figures.
This meant that consumers could purchase household items, specific foods, shoes, and personal care products at a comparatively lower or more stable price. The policy seems to be achieving its goal of reducing inflation. Nonetheless, some experts warn that the transfer to customers may not be finished and that the full consequences may not become apparent for several months.
2. The Collapse of Food Prices and the Base Effect
Since October 2024 had considerably higher inflation—about 6.21% for the overall CPI—the year-over-year comparisons in October 2025 were made against a higher benchmark, which made the decline seem more dramatic.
Supported by both falling prices in categories like vegetables (which fell by about 27.5%) and the favorable base effect, food inflation, which makes up about half of the CPI basket, dropped sharply to -5.02% in October.
Reuters
The rate of food inflation in cities was -5.18%, while it was -4.85% in rural areas.
Bureau of Press Information
Deflation in food is beneficial to consumers in the near term, but it may also indicate underlying structural problems such as unpriced inflation in other sectors, supply chain interruptions, or low demand in rural areas.
3. Non-Food Components and Core Inflation
Core inflation continues to fluctuate about 4.4%, despite the headline decrease. This is due to the increase in categories like “miscellaneous goods & services,” which includes products like gold (up 57.8% annually in October) and silver (up 62.4%).
Reuters
Inflation in the 3-4% range persists in areas such as housing, education, and healthcare, which are less susceptible to changes in GST reductions or food prices. This indicates that despite the headline inflation being low, there are still underlying inflationary pressures.
The conclusion is that, even though consumers may experience comfort right now, monetary policy must still address the underlying structural inflationary dangers hidden by the headline statistics.
4. Effects on Growth and Monetary Policy
There is increasing conjecture that the central bank may lower interest rates as soon as its December meeting because inflation has been far below the Reserve Bank of India (RBI)’s lower tolerance band (2%–6%) for two straight months.
Nonetheless, RBI officials have observed that they are still cautious due to incomplete transmission of past rate reductions, commodity price hazards, and uncertainties in global trade, even if inflation has created “policy space.”
The low inflation figure could increase real incomes, consumer spending, and investment, especially in rural and semi-urban markets, which might lead to a recovery in local demand.
5. What to Be Wary Of and Precautions
The main hazards persist:
Inflation may rise once more as a result of a change in the trend of food costs caused by unforeseen weather patterns or supply shocks.
Reuters
If the GST reduction is not fully transmitted, the prices may rebound in the medium term.
Controlling finances
The fact that core inflation remains unresolved indicates that, as base effects diminish, inflation may rise to about 4% in the beginning of 2026.
Reuters
For this reason, businesses must remain vigilant, and politicians must strike a balance between taking advantage of low inflation and planning for any possible upside risks.
In conclusion
The exceptionally low inflation rate of 0.25% in October 2025 demonstrates a significant change in the trajectory of India’s consumer prices. Customers are seeing considerable price relief as a result of GST changes, food price deflation, and advantageous base effects. Core inflation, though, is still high beneath the surface, and structural dangers persist. This signals both opportunity (increasing purchasing power) and caution (volatile cost dynamics ahead) for firms. This gives the RBI and legislators a chance to promote growth through rate reductions, but it also requires them to keep an eye on potential upside inflation risks. The real question will be whether the respite is lasting or just a brief lull before the next wave, as India makes its way through this period of low inflation.
