Mumbai, October 14, 2025 – With inflation dropping to its lowest levels in nearly a decade, the Reserve Bank of India (RBI) is expected to reduce the repo rate by 25 basis points in December, possibly bringing it down to 5.25%. This move is likely if the existing 50% import tariff continues through the end of the year, according to a recent report.
The report, based on data compiled by HSBC, also suggests that the central government may introduce a fresh fiscal stimulus package aimed at exporters. This could come alongside broader economic reforms intended to give the economy a growth boost.
Inflation, measured by the Consumer Price Index (CPI), has dropped sharply — falling to 1.5% in September on a year-on-year basis. This is the lowest reading since June 2017 and is primarily due to a decline in food prices, particularly vegetables, which have returned to deflation following a temporary spike in August caused by heavy monsoon rains.
Strong cereal output and well-stocked public grain reserves also contributed to easing food inflation. Monthly price drops were observed in cereals and pulses, helping bring overall inflation pressures down.
For the July–September quarter, inflation averaged 1.7%, just below the RBI’s forecast of 1.8%.
However, core inflation remains a concern. A sharp 47% rise in gold prices has kept underlying inflation elevated, with gold alone adding about 50 basis points to the headline CPI. When excluding volatile items like food, energy, housing, and gold, the core inflation measure stood steady at 3.2% for the quarter.
Looking ahead, inflation in October is projected to dip below 1%, driven by a continued decline in vegetable prices — which fell between 3% and 5% in the first ten days of the month. Additional downward pressure is expected from falling oil prices and more affordable imports from China.
If this trend continues, the RBI may find enough room to ease its monetary policy stance in the coming months, potentially giving a much-needed boost to consumer demand and economic momentum.