India CPI inflation october 2025: How GST affects CPI

India’s retail inflation fell to a 99-month low of 0.25% in October 2025. Retail inflation is measured by the Consumer Price Index (CPI) and its down from the previous month, in September India’s retail inflation was 1.54%, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI).

This decline in the inflation marks one of the lowest levels in recent years and it indicates a high relief from rising prices of essentials for many consumers. Lower CPI inflation could influence RBI’s decision on repo rate cuts. Kerala, the 13th-most populous state in India recorded the highest inflation at 8.56% though it fell from 9.05% in September. Meanwhile, the states of Bihar, Uttar Pradesh, and Madhya Pradesh recorded the lowest inflation rates. The new GST rates and reforms have also significantly impacted the Indian economy and helped in controlling inflation.

Falling Food Prices in India

Inflation impacts purchasing power, but the biggest factor behind the decline in overall inflation was a drop in food prices. India has a large agricultural sector, and food inflation fell sharply to -5.02% in October, down from -2.28% in September. Rural areas recorded a decline of -4.85%, while urban food inflation was -5.18%. The main factor behind this drop is the reduction in prices of groceries and everyday essentials. The prices of vegetables, seasonal fruits, oils and fats, cereals, and related products fell across the country, giving families some relief on monthly spending.

Impact of Tax and Policy Changes

On September 22, 2025, the Government of India reconstructed the tax system by introducing GST 2.0, in which the government kept only two main GST rate slabs of 5% and 18%, removing the 12% and 28% rates from the GST structure. These policy changes under GST 2.0 helped ease price pressures across various sectors. Many daily-use items, including stationery and daily products like milk, bread, butter, and other essentials, became slightly cheaper and shifted to the lower 5% bracket due to the reduced tax.

While essentials like food became cheaper, inflation changed differently across sectors. Housing and healthcare costs easing slightly, transport and communication became cheaper, but fuel prices stayed the same. Lower inflation may influence RBI policy and interest rates, which may change loan and deposit costs. Overall, the slowdown reflects lower costs, making many goods and services more affordable.