India: Inflation slows in September from the prior month
Latest reading: Consumer prices rose 1.5% in annual terms in September, following a 2.1% rise in the prior month. The rise was the softest since June 2017, undershot the Reserve Bank of India’s (RBI) 2.0–6.0% target and matched market expectations.
Relative to the previous month’s figures, there were milder price pressures for food and beverages (-1.4% on a year-on-year basis vs 0.0% in August) and fuel and light (+2.0% vs +2.3% in August). Food prices have been weighed on by recently strong harvests, and fuel and light prices by the decline in oil prices in international markets. Moreover, a cut to the consumption tax, effective 22 September, further depressed prices.
Finally, the variation in clothing and footwear prices was the same as in the prior month (+2.3% in September and August).
Meanwhile, consumer prices increased 0.1% in September on a month-on-month basis, following a 0.46% rise in the previous month.
Outlook: In recent weeks, our panelists have significantly cut their inflation forecasts for FY 2025 (April 2025–March 2026) and FY 2026, largely due to the recent decline in food and oil prices.
Still, inflation should return to the target in the October–December quarter, before rising a bit above the midpoint of the target in the April–June quarter next year. This suggests the RBI is succeeding in controlling price pressures, increasing the probability that it reduces interest rates further at its next meeting, as a slight majority of our panelists expect it to do.
Panelist insight: Goldman Sachs analysts Santanu Sengupta and Arjun Varma said:
“Given the continued food price deflation in October, we lower our headline inflation forecast by 0.7pp to 1.9% yoy in Q4 CY25 but subsequently bake in a sequential increase in Q1 CY26. Taken together, our headline inflation forecast for CY25 and FY25 is lower by 0.3pp each to 2.5% yoy each, while our CY26 headline inflation forecast is higher by 0.1pp to 4.1% yoy.”