As Diwali approaches, Indian households have received a welcome gift in the form of sharply reduced inflation. According to the National Statistical Office (NSO), India’s Consumer Price Index (CPI)-based retail inflation dropped to 1.54% in September 2025, the lowest level recorded in the past eight years. The decline is largely attributed to a sharp fall in prices of food items, including vegetables, pulses, and edible oils — offering much-needed relief to millions of consumers during the festive season.

Inflation at an 8-Year Low

The latest NSO data reveals that retail inflation eased from 2.07% in August to 1.54% in September, marking a 0.53% decline within a month. This is the lowest inflation rate since June 2017, signaling improved price stability across essential commodities. Economists say this dip will significantly ease the financial strain on households and allow consumers to save more during the festival months.

Why Prices Are Falling

The biggest reason behind this decline is the sharp correction in food prices. September saw substantial drops in the cost of key food items:

• Vegetable prices fell by over 21%, led by cheaper green vegetables and onions.

• Pulses witnessed a 15.3% decline, thanks to improved domestic production and stable imports.

• Edible oils, fats, cereals, fruits, and eggs also saw modest price corrections, further easing overall inflationary pressure.

With this, food inflation slipped to -2.28%, the lowest since December 2018. The fall in essential food prices not only lowered household expenses but also strengthened the purchasing power of the average consumer — a critical boost for sentiment ahead of Diwali.

Government Measures Show Impact

Economists attribute part of this improvement to government policy reforms, particularly those implemented under the Goods and Services Tax (GST) framework. The rationalization of GST rates and improved supply chain management have contributed to price stability.

Additionally, measures to control hoarding, enhance logistics efficiency, and improve agricultural output have kept prices of daily essentials in check. Analysts expect this downward trend to continue in the coming months, especially if the harvest season remains favorable and crude oil prices stay stable globally.

What Lower Inflation Means for Consumers

For ordinary citizens, low inflation translates to greater purchasing power and improved household savings. The decline in food prices means daily essentials — from vegetables and cooking oil to cereals — are now more affordable.

For homemakers managing tight kitchen budgets, this drop provides breathing room just before the festive season. Cheaper groceries and stable energy prices mean families can allocate more of their income toward gifts, celebrations, and other festive expenses.

Economists also point out that such trends reflect positively on the broader economy, indicating improved supply-side conditions and effective price management in the food sector.

Core Inflation and Economic Outlook

While overall inflation has fallen sharply, core inflation — which excludes volatile food and fuel prices — remains around 4.5%. This suggests that while essential goods are cheaper, prices of non-food items such as services and manufactured products remain relatively steady.

However, with headline inflation now well below the Reserve Bank of India’s (RBI) comfort zone of 4%, experts believe the central bank could consider interest rate cuts in the coming months to stimulate economic growth. Lower lending rates would reduce borrowing costs for both consumers and businesses, potentially boosting investment and consumption across sectors.

A Boost for Festive Spending and Growth

The timing of this inflation relief couldn’t be better. As the Diwali shopping season peaks, lower prices are expected to fuel consumer demand, particularly in the retail, FMCG, and automobile sectors. Stronger household purchasing power will likely translate into higher festive sales, giving the economy a welcome push in the second half of the financial year.

In short, India’s lowest inflation reading in eight years is not just a statistical achievement — it’s a tangible relief for millions of families preparing for the festive season. Cheaper food, stable fuel prices, and a brighter economic outlook have combined to create a sense of optimism across markets.

As experts predict, if these trends continue, 2025 could mark the beginning of a sustained period of price stability and economic momentum, giving both consumers and policymakers reasons to celebrate this Diwali.