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India's Inflation Hits Record Low: How GST Reforms Are Taming Prices

India's consumer price inflation has reached a record low of just 0.25% in October. Economists attribute this positive trend to the government's GST rationalization measures taking full effect. Food inflation has plunged dramatically to -5.02%, becoming the primary driver behind the overall price decline. With adequate food supplies and favorable base effects, economists expect inflation to remain manageable in the coming quarters.

Key Points: CPI Inflation Drops to 0.25% as GST Reforms Show Impact

  • October CPI inflation drops to record low of 0.25% year-on-year
  • Food inflation plunges to -5.02%, driving overall price decline
  • Economists credit GST rationalization for favorable inflation impact
  • RBI expected to cut rates in December policy review
  • Strong agricultural activity supports continued food price stability
  • Infrastructure investment needed to sustain low inflation benefits
3 min read

CPI inflation drops to record low as GST rationalisation takes full effect: Economists

India's CPI inflation hits record low of 0.25% in October as GST rationalization takes effect, with economists predicting continued price stability and potential rate cuts.

"The record-low food inflation of the current CPI series at -5.02% is the major contributor to lowest headline inflation - Rajeev Juneja, PHDCCI"

New Delhi, Nov 12

Economists on Wednesday said the further softening of the CPI inflation for the month of October is owing to the government's prudent GST reforms, which are showing a favourable impact on the economy.

The year-on-year inflation rate based on All India Consumer Price Index (CPI) for the month of October stood at 0.25 per cent (provisional).

“The record-low food inflation of the current CPI series at -5.02 per cent (provisional) is the major contributor to lowest headline inflation of the current CPI series,” said Rajeev Juneja, President, PHDCCI.

To further bolster the impact of this period of low inflation, thrust should be laid on building infrastructure and logistics projects, strengthening agriculture supply chains to avoid food price spikes, and prioritizing technology-driven productivity gains in manufacturing and services, he added.

According to Dr Ranjeet Mehta, CEO and Secretary General, PHDCCI, over the next two quarters, “we anticipate that India's inflation will stay within a manageable range on the back of sufficient food supply, reasonable energy prices, and Reserve Bank of India's strategic monetary management”.

According to Rajani Sinha, Chief Economist, CareEdge Ratings, the CPI inflation continued to stay on a downward trajectory easing to 0.3 per cent in October, which is in line with our expectations.

“The positive impact of the GST rationalisation and deflation in the food and beverages category supported the lower inflation print. Deflation in the food basket deepened further to 3.7 per cent in October from 1.4 per cent last month,” said Sinha.

Overall, economists expect food inflation to stay at moderate levels on the back of healthy agricultural activity and a favourable base.

Furthermore, adequate reservoir levels, and strong kharif sowing bode well for food price stability.

“Going forward, inflation is projected to average 0.9 per cent in Q3 before rising to 3.1 per cent in Q4 FY26. With food inflation subdued, we project average inflation for FY26 at 2.1 per cent,” Sinha noted.

Aditi Nayar, Chief Economist, ICRA Ltd, said that the RBI MPC is likely to pare its CPI inflation projection for FY2026 further from 2.6 per cent (as mentioned in October 2025 meeting), driven by the soft sequential momentum in food prices as well as the impact of the GST rate rationalisation on several items in the CPI basket.

“This, along with the dovish tone of the October 2025 policy document, would support a 25-bps rate cut in the December 2025 policy review, unless Q2 FY26 GDP growth surprises on the upside,” Nayar mentioned.

- IANS

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Reader Comments

R
Rohit P
While low inflation is welcome, I'm concerned about farmers' incomes. If food prices are falling so much, are our farmers getting fair prices for their produce? The government needs to ensure both consumers and producers benefit.
A
Arjun K
Great to see GST reforms working! The rationalization has made many essential items more affordable. This is exactly what our economy needed - policy decisions that actually benefit common people.
S
Sarah B
As someone who follows economic indicators closely, this is impressive management by RBI and the government. The combination of monetary policy and GST reforms seems to be paying off. Hope the rate cut happens in December!
V
Vikram M
Good numbers but let's see if this actually translates to lower prices in local markets. Sometimes these statistics don't match ground reality. Still, cautiously optimistic! 🤞
K
Kavya N
The focus on infrastructure and agriculture supply chains is crucial. We've seen how sudden price spikes in vegetables can disrupt household budgets. Hope the government continues these long-term measures.

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