Gold helped headline retail inflation, as measured by the Consumer Price Index (CPI), remain in positive territory in October, though it slipped to a multi-year low. At the same time, the impact of GST was much more than anticipated.
The National Statistics Office (NSO) reported retail inflation at 0.25 per cent in October, mainly due to the base effect, lower food prices, and the impact of GST. The print is lowest in the current series, with the base year of 2012. This series was formally introduced with effect from January 2015.
Gold lifts inflation
According to market sources, gold prices rose significantly in October, with the highest price for 10 grams of 24-carat gold reaching Rs 1.31 lakh. This impacted the headline inflation. An SBI research report said that CPI inflation increased in personal care and effects, owing to higher gold prices. Inflation in gold remains high at 57.8 per cent in October. “If we exclude gold from headline CPI, it turns negative at -0.57 per cent,” the report said, while expecting the current trend of CPI excluding gold to remain negative in the next two months.
Meanwhile, core CPI (headline number minus volatile food and fuel prices) didn’t change much, coming in at 4.33 per cent in October, compared to 4.36 per cent in September, with the gold price reflected in higher personal care and effects inflation. “Core CPI excluding gold is lower at 2.6 per cent,” the SBI research report said.
A report by HDFC Bank said that on a sequential basis, CPI inflation rose marginally by 0.1 per cent, while core inflation rose by 0.5 per cent. The pick-up was driven primarily by gold prices, which rose 12.5 per cent m-o-m. On the other hand, transport & communication and recreation & amusement declined by 0.7 per cent m-o-m and 0.2 per cent m-o-m, respectively, likely reflecting the GST rate reduction. Importantly, “CPI ex-gold came at (-) 0.6 per cent y-o-y,” a report by HDFC Bank said.
GST cuts bite deeper
A government statement highlighted the impact of GST on all sectors. A Barclays report found the impact to be staggered. “We observe a moderate impact of GST rate cuts in food CPI in October (most of the tax cuts were concentrated in ‘processed foods’ CPI), reinforcing our view that the impact of tax cuts would be staggered here, given the large unorganised sector and sale of non-branded food products in loose packaging. For example, milk products CPI rose 0.3 per cent in October (Sep: 0.1 per cent) vs the previous 3y average rise of 0.7 per cent. “‘Cooked snacks purchased’ CPI rose 0.2 per cent vs historical average of 0.4% for the same period. These are indicative of some pass-through (as increase is lower than the historical average) but still limited overall,” it said.
However, the SBI research report found that the impact of GST rationalisation was higher than anticipated. “We earlier estimated that CPI will moderate by around 65-75 bps owing to GST. However, the decline in CPI inflation due to GST has been higher at around 85 bps,” it said.
Published on November 13, 2025