India’s retail inflation dropped sharply to an over eight-year low of 1.54% in September, compared with 2.07% in August, offering some temporary relief to consumers. The decline was mainly due to a favourable statistical base and a fall in the prices of vegetables and pulses. However, the rise in core inflation — which excludes food and fuel — has raised fresh concerns among economists and policymakers.
According to official data, this is the lowest retail inflation figure since June 2017. The fall was largely expected, with a Mint poll of economists predicting inflation around 1.5% for the month. Despite slipping below the Reserve Bank of India’s (RBI) lower tolerance limit of 2% for the second time in three months, experts believe the current softness in prices may not last long, as it is primarily driven by the base effect.
Core inflation, on the other hand, rose to a two-year high of 4.43% in September. This increase was led by a sharp jump in the prices of gold and silver as demand picked up ahead of the festive season. Economists pointed out that higher prices of non-food items indicate underlying price pressures in the economy, even as headline inflation remains subdued. 
In August, retail inflation had risen for the first time in almost a year, pushed up by costlier tomatoes, eggs, meat, and fish, and a weaker deflationary pull from other food items. However, September saw the trend reverse as vegetable prices eased and food inflation remained muted.
The government’s data also suggests that inflation in the current quarter is expected to remain below the 2% mark — around 1.8% — before rising to 4% in the January-March quarter of 2026, as the base effect becomes less favourable. Analysts believe that while the current low inflation offers the RBI some breathing space, it may not change the central bank’s cautious stance on interest rates just yet.
