Inflation dives as growth opportunities widen
India’s consumer price inflation (CPI) plunged to a record low of 0.25% year-on-year in October 2025, marking a dramatic decline from September’s 1.44% and underscoring the depth of disinflation across the economy. This sharp break opens up renewed hopes that the RBI may cut its policy rate sooner rather than later.
How we got here: A rare low-inflation scenario
The CPI series shows this as the lowest inflation print since the current methodology began in 2013.
Key underlying trends include: substantial food price deflation, GST-slab rationalisation that took effect in September, and a favourable base effect compared with the previous year.
At the same time, the RBI had already cut the repo rate by 100 basis points earlier in 2025, bringing it from 6.5% to 5.5%.
Major take-aways from the latest inflation print
- Retail inflation slump to 0.25% in October 2025 well below the RBI’s comfort zone of 2-6%.
- Food inflation entered deflation territory and played a key role in the drop.
- Due to this low inflation, economists now see scope for another 25 basis-point repo-rate cut at the RBI’s next Monetary Policy Committee meeting, likely in early December.
- The record low inflation also means households with floating-rate loans could benefit from lower EMIs if banks pass on the rate cuts.
Insight from economists and markets
Economists at Barclays India note that the ultra-low inflation gives the RBI a “policy space” to ease further.
Dipti Deshpande of CRISIL observed that the decline in inflation was aided by both GST rationalisation and poor demand which presents a dual challenge.
They caution, however, that very low inflation could also signal weak demand meaning the RBI must tread carefully.
Why this matters for you, your loans and the economy
- With low inflation, borrowers may see floating-rate loans become cheaper provided banks reduce lending rates in line with the repo cuts.
- A lower repo rate can stimulate growth by lowering lending costs for businesses, boosting investment and consumption.
- On the flip side, ultra-low inflation can reflect weak consumer demand which could slow the economy and job creation.
- For investors and savers, it means deposit rates may stay stuck or fall, while bond yields could compress further.
What’s next: The road ahead for RBI and borrowers
- The next MPC meeting (likely in early December) will be closely watched. Analysts expect another 25 bps cut unless growth signals or global risks deteriorate.
- Banks will need time to transmit rate cuts to borrowers; homeowners and auto-loan borrowers should watch for interest-rate announcements.
- Consumers should keep an eye on loan terms and the spread between the repo rate and bank lending rate since spread compression affects savings interest.
- A rebound in inflation (food, fuel) or a global shock could force the RBI to pause, so the “cut window” may be narrow.
In conclusion: A rare opportunity, but one with caveats
India’s retail inflation falling to just 0.25% in October is a notable milestone. It provides the RBI with rare policy flexibility to support growth through interest-rate cuts. For borrowers, this could translate to lower EMIs in the coming months. Yet the other side of the coin is weak demand and the risk of deflation which the RBI cannot ignore. The next few weeks will be critical in determining whether the central bank moves or holds steady.
