Food prices continue to cool; CPI seen near 1.2% in September: BoB Report

India’s food inflation continued its downward slide in September, with the Bank of Baroda Essential Commodities Index (BoB ECI) remaining in deflation for the fifth consecutive month, dropping by 1 per cent year-on-year and accelerating to 3.8 per cent in the first week of October 2025.

The moderation was largely driven by a sharp decline in prices of tomato, onion, and potato, key vegetables that had earlier pushed inflation higher. “Tomato prices witnessed a steep correction in September, supported by robust arrivals and efficient supply management,” said Dipanwita Mazumdar, Economist at Bank of Baroda.

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According to the report, headline CPI is expected to ease to around 1.2 per cent in September 2025, aided by a favourable statistical base and GST rate cuts being passed on by auto, FMCG, and e-commerce companies.

Among the 20 commodities tracked by BoB ECI, nine showed deflation, with onion prices seeing their sharpest fall since December 2020. Retail prices of onion plunged by over 46 per cent year-on-year in September, while potato prices dropped nearly 31 per cent. Tomato prices, which had rebounded in August, fell again by 8.3 per cent YoY in September.

The report noted that the aggregate CPI-weighted trajectory for TOP vegetables dropped 29.5 per cent in September, reflecting improved supply and logistics. Arrival data from major producing states such as Maharashtra, Madhya Pradesh, and Uttar Pradesh indicated strong growth compared to last year.

Other food categories also exhibited softening. Edible oils, particularly mustard, soya, and sunflower, showed price declines amid ample global supply, especially from Argentina. Pulses, led by gram and tur dal, also witnessed notable easing, with arhar prices falling almost 30 per cent year-on-year.

Sequentially, BoB ECI dipped 0.3 per cent month-on-month, suggesting that inflation momentum is steadily losing steam.

The report highlighted that while energy and metal prices showed some firming due to global tariff effects, the pass-through to consumer inflation remains limited. Excluding gold, core inflation is projected in the 3.1–3.5 per cent range, though volatility may persist given the recent spike in global gold prices.

With robust harvest arrivals expected in Q3 FY26, food prices are likely to stay benign. “The downward spiral in Tomato, Onion, and Potato (TOP) vegetables could continue in the near term, posing a significant downside risk to inflation,” Mazumdar added.