Retail Inflation at an Eight-Year Low: Drivers, Risks, and Policy Implications
UPSC Relevance
Prelims: Indian Economy (Inflation - Consumer Price Index (CPI), Wholesale Price Index (WPI); Monetary Policy - Reserve Bank of India (RBI), Monetary Policy Committee (MPC), Repo Rate); Key Institutions (Ministry of Statistics and Programme Implementation - MoSPI).
Mains:
General Studies Paper 3 (Economy): Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Inflation; Government Budgeting. The relationship between inflation and monetary policy is a core GS3 topic.
Key Highlights from the News
Retail inflation in India reached an eight-year low of 1.54% in September 2025.
Retail inflation is calculated based on the Consumer Price Index (CPI).
Main reasons for the decrease in inflation:
Falling food prices. The food price index recorded a contraction of 1.4%.
Reduced increase in fuel prices.
This inflation rate is below the Reserve Bank of India's (RBI) tolerance limit of 2%.
This increases the hope that the RBI might be prompted to cut interest rates in the next Monetary Policy Committee (MPC) meeting in December, to stimulate economic growth.
Future concerns: Continuous increase in edible oil prices and potential crop damage due to unseasonal rains could lead to a rise in inflation again.
COMMENTS