India October inflation touches lowest of the series at 0.25%

13 Nov 2025 , 09:04 AM

OCTOBER 2025 INFLATION AT 0.25% – A DOUBLE-EDGED SWORD

If CPI inflation felt too low in September at 1.54%, there are two interesting updates. The September inflation has been revised lower by 10 bps to 1.44%. On top of that, October 2025 inflation has come in at just 0.25%. Between October 2024 and October 2025, CPI inflation has fallen 596 bps from 6.21% to 0.25%. Food inflation has now remained in negative zone for 5 months in a row; and is also at its lowest level in the current series.

This opens the doors for RBI to eventually cut inflation estimates for FY26 to under 1.5%. However, is inflation at 0.25% really good news? Remember, just as high inflation can kill your purchasing power, very low inflation can be a warning of an impending demand slowdown. Lower demand and lower spending could eventually translate into lower output, lower incomes and lower jobs. Government must ready its Plan-B now!

How much has base effect played a role in inflation. Actually, the importance of base effect is reducing with the food inflation and headline inflation at multi-year lows for quite some time. However, it is also a warning. Remember, in October 2024, food and headline inflation had peaked. Going ahead, each month will see the diminishing of the base effect, so one should not be surprised to see some revival in inflation levels.

FOOD DRAGS DOWN INFLATION; GOLD HOLDS CORE INFLATION HIGH

Food inflation (47.25% of the basket) was in negative for the fourth month in a row.

Month	Food Inflation (%)	Core Inflation (%)	Headline Inflation (%)
Oct-24	10.87%	3.67%	6.21%
Nov-24	9.04%	3.64%	5.48%
Dec-24	8.39%	3.58%	5.22%
Jan-25	6.02%	3.67%	4.26%
Feb-25	3.75%	3.95%	3.61%
Mar-25	2.69%	4.10%	3.34%
Apr-25	1.78%	4.07%	3.16%
May-25	0.99%	4.17%	2.82%
Jun-25	-1.01%	4.40%	2.10%
Jul-25	-1.76%	4.10%	1.61%
Aug-25	-0.69%	4.20%	2.07%
Sep-25	-2.28%	4.20%	1.54%
Oct-25	-5.02%	4.40%	0.25%

Data Source: MOSPI & Ministry of Finance Estimates

The latest data on consumer inflation shows some vast divergence from the averages. For instance, the food inflation in October is at -5.02%, against the last 12-month average of 3.15%. Headline inflation is now at 0.25%, compared to the last 12-month average of 3.45%. However, latest core inflation at 4.4% is above the 12-month average of 3.98%.

NON-FOOD INFLATION: URBAN VERSUS RURAL

Between September and October 2025, headline inflation fell sharply from 1.44% to 0.25%. During this period, headline rural inflation fell from 1.07% to -0.25%, while headline urban inflation also fell from 1.83% to 0.88%. What about food inflation? Between September and October 2025, food inflation softened from -2.33% to -5.02%. Rural food inflation softened from -2.22% to -4.85%, while urban food inflation dipped from -2.47% to -5.18%.  Clearly, there has been a very sharp fall in non-food inflation in rural India.

Non-Food Basket	Non-Food Weights	Rural Inflation	Urban Inflation	Headline Inflation
Clothing	6.32	1.71	2.27	1.89
Footwear	1.04	0.57	0.29	0.49
Clothing and footwear	7.36	1.56	1.98	1.70
Housing	–	–	2.96	2.96
Fuel and light	7.94	1.49	2.83	1.98
Household goods and services	3.75	1.72	2.82	2.26
Healthcare	6.83	3.88	3.77	3.86
Transport and communication	7.60	1.02	0.85	0.94
Recreation and amusement	1.37	1.39	1.53	1.46
Education	3.46	3.02	3.78	3.49
Personal care and effects	4.25	24.28	23.35	23.88
Miscellaneous	27.26	6.06	5.23	5.71

Data Source: MOSPI & Ministry of Finance Estimates

In the non-food basket; urban inflation has been higher in clothing, fuel & light, household goods, recreation, and education. On the other hand, rural inflation is higher for footwear, healthcare, transport & communication, Personal Care Effects, and other items. The high inflation number on personal effects is due to the impact of gold and silver prices. In fact, the estimate is that if the impact of gold were removed, the headline inflation would have fallen from 0.25% to around -0.58%.

FOOD BASKET: HOW RURAL AND URBAN INDIA STACKED UP?

Food basket, with a weightage of 47.25%, is a major swing factor for CPI inflation.

Food Basket	Food Weights	Rural Inflation	Urban Inflation	Headline Inflation
Cereals and products	12.35	0.46	1.96	0.92
Meat and fish	4.38	1.22	2.60	1.74
Egg	0.49	1.29	1.41	1.33
Milk and products	7.72	2.09	2.87	2.35
Oils and fats	4.21	11.82	9.99	11.17
Fruits	2.88	8.26	5.00	6.69
Vegetables	7.46	-27.28	-28.06	-27.57
Pulses and products	2.95	-16.09	-16.27	-16.15
Sugar and Confectionery	1.70	4.19	3.76	4.02
Spices	3.11	-3.66	-2.53	-3.29
Non-alcoholic beverages	1.37	3.13	3.97	3.49
Prepared meals	5.56	3.81	4.09	3.96
Food Basket	47.25	-4.85	-5.18	-5.02

Data Source: MOSPI & Ministry of Finance Estimates

How do rural and urban inflation compare on the food basket? Rural inflation is comparatively higher in case of oils & fats, fruits, vegetables, pulses, and sugar & confectionary. On the other hand, urban inflation is higher in case of cereals, meat, fish, milk, spices, non-alcoholic beverages, and prepared meals.

WILL 0.25% INFLATION INDUCE RBI TO CUT RATES IN DECEMBER?

In the August and October RBI MPC meetings, there was an unwillingness to cut rates. After all, the RBI had cut rates by 100 bps between February and June and you had to give it time to transmit and settle down. However, there are other X-factors. For instance, the US shutdown has meant that US data flows are not forthcoming. There is almost a policy vacuum in the US and the RBI is not getting any cues. Also, the tariffs continue, and the RBI wants to ensure some firepower at its disposal if it needs to push growth.

However, the RBI has one more worry now with inflation as low as 0.25%. Normally, such low inflation is rarely conducive to robust growth and that would mean we may be staring at a slowdown in spending and consumption. Rather than cutting rates, the RBI may look to the government to give a fiscal push.  That does make a lot of sense at this juncture; even if it means that fiscal targets may temporarily go off tangent!