New Delhi: India’s overall inflation rate fell into negative territory for the first time in over a decade, as the consumer price index (CPI) fell to an all-time low of -0.25% in October 2025. Food inflation, for the first time since 2013, also contracted to -5.02%, as strong agricultural output for both Kharif and Rabi harvest helped control inflation. The pre-Diwali GST rate cuts offered the first hope for a change, and that’s hope is expected to play out, at least in the near term.
This also brings with it the prospect of lower interest rates on EMIs and other essential goods, bringing hopes that the RBI would reduce the repo rate further in December. Yet analysts are in a wait-and-watch mode, especially as the long-delayed Indo-US trade deal is expected to close soon.
“Although we expect CPI inflation to bottom out in Q3 FY26 and pick up gradually thereafter, the outlook remains benign for the foreseeable future. The sustained trend of downward pressure on food prices since the beginning of this year, coupled with the recent reduction in prices driven by GST adjustments, has pulled the CPI inflation curve for FY26 systematically lower. We now estimate FY26 CPI inflation to average at 2.1% vs. our projection of 2.6% earlier.” Yuvika Singhal, Economist at QuantEco Research, said in an interaction with the Times of India.
“Consequently, compared to its H1 average of 2.2%, CPI inflation is estimated to be lower in H2 FY26, averaging at 1.9%. Several factors have contributed to this favourable outlook, including the positive impact of a strong monsoon on Kharif crop output, healthy reservoir levels facilitating an early start to Rabi sowing, and restrained increases in the Minimum Support Price (MSP) for both Kharif and Rabi crops, which have collectively contributed a disinflationary impulse of approximately 10 basis points. Additionally, the GST-driven reductions in prices have further supported this downward trend in inflation,” she added.
Given the current market and macroeconomic conditions, analysts expect a rate cut soon.
“I think the market is now expecting a rate cut in December. Our view is that we would see a very high probability of a 25-basis-point cut in December. Government bond yields are actually, I think, somewhere down the line because, traditionally, across various cycles in fixed income markets, they don’t react to the last rate cut—and in fact, we see a sell-off after the last rate cut.” Devang Shah, Head of Fixed Income at Axis AMC, explained.
