Inflation Outlook: Oct CPI May Hit Historic Low On Soft Food Prices, GST Cut; Gold Rally To Keep Core In Check

Inflation Outlook: Continued easing in food prices and the impact of recent Goods and Services Tax (GST) reductions are expected to bring India's Consumer Price Index (CPI) inflation down to a record low below 1% in October 2025. However, experts note that the ongoing rally in gold prices could limit the decline in core inflation.

India's CPI inflation, aka retail inflation, shows how the cost of living for people has changed over a month compared to the same month last year. The CPI inflation data for October is set to be released on Wednesday, November 12.

India's retail inflation has continued to hover below the Reserve Bank of India's 4% target since February. A significant decline in October retail inflation may increase the likelihood of a repo rate cut in December.

India CPI Inflation In October

India's retail inflation may fall in the 0-1.5% due to a host of positive factors like declining food prices, GST rate cut effect, favourable base effects, etc. "Crisil expects retail inflation to fall further to around 0.5% in October from 1.5% in September.

Two factors will guide the further decline in CPI inflation - continued softening of food prices and the impact of GST rate reductions. October marks the first full month reflecting the revised, lower GST rates on mass consumption goods," noted Dipti Deshpande, Principal Economist, Crisil Ltd.

Easing vegetables, pulses prices and moderate edible oils rates will contribute in food and beverages (F&B) category deflation, added Deshpande. "October's retail inflation is expected to ease to one of the lowest levels in recent months, likely hovering around 0.4%-0.6%" stated Naren Agarwal, CEO, Wealth1.

Which Factors Can Impact India's CPI Inflation In October?

Continuous decline in items falling in the foods and beverages category have significantly impacted in the declining inflation rate. Additionally, the revised GST rates will also contribute in declining inflation.

"The moderation is primarily driven by a favourable base effect, cooling food prices, and the cascading impact of GST rationalisation on select categories. After months of supply-side volatility, price pressures are showing clear signs of stabilisation, with cereals, pulses, and vegetables contributing less aggressively to the headline index," explained Agarwal.

"Base effects are most supportive in this month, as it mirrors the sharp increase in vegetable prices we had seen in October last year...(and) despite persistent unseasonal rainfall, food inflation remains contained in India, and we see distinct and broad-based disinflation across the country," stated Rahul Bajoria, India & ASEAN economist at BofA Securities.

GST Rate Cut To Have Greater Impact On Core Inflation

Apart from impacting food prices, GST rate cut will have a wider effect on reducing core inflation. Core inflation generally includes lesser volatile items like housing, education, healthcare, transport and communications, precious metals and commodities, etc.

"We believe that the benefit to core categories should overtime be greater than food categories. Although the weight of food in the overall CPI index is larger, the extent of net GST rate reductions applicable to the core items are greater," added Deshpande.

Gold Price Rally To Limit Softening of Core Inflation

While the GST rate cut may have a favourable impact on core inflation, the ongoing rally in gold prices could offset this effect, limiting the overall softening in core inflation. Gold prices have declined significantly in October, but has increased around 55% since the beginning of the year.

A sharp surge in gold prices (~60% on year) in October will limit the softening in overall core inflation. Core inflation excluding gold would better capture the GST impact, according to Deshpande.

Overall, India's falling retail inflation may provide a wider headroom to policy makers to make crucial decisions. "This benign inflation trajectory reinforces the view that India's macro focus is gradually shifting from inflation management to sustaining growth momentum. For policymakers, it provides valuable headroom to continue with a growth-supportive stance, especially as global commodity prices remain range-bound and domestic liquidity stays ample," said Agarwal.