A Mint analysis of the inflation basket shows that October 2025 saw a month-on-month decline in prices (consumer price index) in 40% of the items—the highest ever under the current 2012 series, which has item-wise data from 2014. Usually, about 20% of items see such declines during a month. However, the effect of the cuts is already tapering, and economists believe they may have a smaller impact than previously estimated.

In a sweeping set of reforms, the GST Council cut indirect tax rates on nearly 400 items from 22 September. Data suggests the pass-through of rate cuts was sharp and rapid for vehicles and consumer durable electrical goods. It was also visible, albeit only marginally, in many other items such as toothpaste, soap, and leather boots and shoes, among others. Small cars, two-wheelers and consumer durables saw rates drop from 28-31% to 18%. Household essentials such as toothpaste and soaps, dropped from the 12% or 18% slab to 5%.

Of the 299 items for which the statistics ministry has inflation data, motor cars and jeeps recorded a 6.8% price decline in October, the sharpest among all items. This was followed by two-wheelers, which recorded a 4.5% decline. Consumer durables such as televisions, washing machines, air conditioners, and refrigerators saw a 1.6-2.6% decline.

Fading effect

While the effect of the cuts played out in November as well, it was much smaller. A research report by the State Bank of India (SBI) said the decline in CPI inflation owing to GST cuts has been around 25 basis points in the September-November period, while the impact in FY26 could be 35 basis points, much much smaller than the 85-basis-point reduction it had estimated last month.

QuantEco Research also noted the actual impact of the GST cut would be smaller than anticipated, even as the effects could linger in the short term. "Despite the imputed GST-led annualized disinflationary impulse of 132 bps, the actual impact is likely to be much lower, at about 60-70 bps," the report noted.

While there is no doubt that GST rate cuts have already eased prices, they came at a time when inflation was already falling. Sharp rises in gold and silver prices in recent months have pushed inflation up significantly, distorting the wider disinflationary trend. Once gold and silver are removed from core inflation, the figure has been below the RBI's medium-term goal of 4% since after November 2023, signalling a weak demand impulse in the economy. Inflation has been sliding since hitting a recent peak of 3.55% in June 2025, and has been pulled down further by the GST cuts. Core inflation, excluding gold and silver, is currently around 2.6%, Mint's calculations show.

Demand picture unclear

While the impact of GST rate cuts is clearly visible, the goal of the massive reforms was not to reduce inflation but to boost consumption. The monetary policy committee also noted that GST rationalisation and festival-related spending had supported domestic demand during October-November. Some early indicators suggest an increase in demand, particularly passenger vehicle sales, which have been weak, recording an 11.4% year-on-year rise in October and 19.7% in November. The signals are not as clear for other goods and services owing to a lack of robust data.

Even as the Indian economy has stood strong, thanks to low inflation, recording 8.2% GDP growth in July-September, several economists have noted that sustained ultra-low inflation could have negative effects on the economy unless increased demand lifts sentiments and volume. Paras Jasrai, associate director and economist at India Ratings and Research, said if inflation stays too low, it may reduce confidence in profits and growth, apart from the negative impact on government finances, which are based on nominal GDP estimates.