Peter Smith
India just hit a significant economic milestone. Retail inflation dropped to 1.5% in September 2025—the lowest it's been in eight years. This unexpected decline is giving households a break and sparking conversations about whether the Reserve Bank of India might finally cut interest rates in December.
The Numbers Behind the Drop
The National Statistics Office released figures showing headline inflation, tracked through the consumer price index, fell from 2.1% in August to just 1.5% in September. Compare that to 5.5% a year ago, and you can see how dramatic the shift has been. We haven't seen inflation this low since December 2018.
Food prices drove most of this decline: vegetables dropped 21.4%, pulses fell 15.3%, and spices came down 3.1% compared to last year. But it wasn't all good news—personal care items jumped 19.4%, oils and fats rose 18.3%, and fruits climbed 9.9%. Rural areas saw even lower inflation at 1.1%, while cities experienced 2.2%. Core inflation, which excludes food and fuel, stayed relatively sticky at 4.6%, mainly because housing and service costs haven't budged much.
What This Means for Interest Rates
Economists are now seriously discussing rate cuts. With inflation this low and food supply conditions looking stable, experts from firms like Icra and CareEdge think the RBI might reduce rates by 25 basis points in December. Of course, that depends on inflation staying calm over the next couple of months.
Peter Smith
