India's Inflation Hits Record Low: Interest Rate Cut on the Horizon?

Economy

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Updated on 13 Nov 2025, 09:34 am

India's October Consumer Price Index (CPI) inflation has reached an unprecedented low of 0.25 percent, primarily driven by a significant decline in food prices, especially for fruits, vegetables, and pulses. This phenomenon is known as food deflation.

The core inflation, which excludes volatile food and energy prices, saw a minor increase from 4.3 percent in September to 4.4 percent in October. However, when specific items like gold, silver, and intoxicants are excluded, core inflation actually decreased to 2.54 percent from 3.09 percent in the previous month.

Economists attribute the subdued consumer prices for goods, despite global tariff pressures on Indian exports, to timely reductions in Goods and Services Tax (GST). The downward trend in prices for pulses, vegetables, and fruits observed in November's high-frequency data further strengthens the case for a potential 25 basis points interest rate cut by the Reserve Bank of India (RBI) at its December policy meeting.

India's economic growth is robust, projected to average 6.5 percent over the next 3-5 years, with Q2 FY26 GDP growth forecast at 7.2 percent. However, concerns exist that sustained food deflation could negatively impact farm incomes, creating future policy challenges. The full effect of international tariffs on India's trade is also expected to unfold gradually.

Impact This news is highly significant for the Indian stock market as it influences monetary policy decisions, investor sentiment, and corporate borrowing costs. Lower interest rates can stimulate economic activity and potentially boost equity valuations. Rating: 8/10.

Glossary: Consumer Price Index (CPI) Inflation: A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Food Inflation: The rate at which the prices of food items increase or decrease. Core Inflation: Inflation rate that excludes temporary volatile elements of inflation, typically including food and energy prices, to provide a clearer picture of underlying price trends. Sticky Inflation: Inflation that tends to persist over time and does not change much in the short term. Goods and Services Tax (GST): A comprehensive indirect tax levied on the supply of goods and services across India. Basis Points (bps): A unit of measure used in finance to describe the percentage change in the value or rate of financial instruments. One basis point is equal to 0.01% (1/100th of a percent). GDP (Gross Domestic Product): The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. Food Deflation: A decrease in the general price level of food products.