Retail inflation in India fell to 3.34% in March 2025, the lowest level seen in 67 months. This is a sharp drop from 3.61% in February. The main reason behind this fall is the steady decline in food inflation, especially in prices of vegetables, eggs, and pulses.
This is the second month in a row where inflation stayed below the Reserve Bank of India’s (RBI) 4% target. With inflation now easing quickly, experts are expecting that the RBI may cut interest rates further in its upcoming June policy meeting. In its April meeting, the RBI had already reduced the repo rate by 25 basis points to 6%, after another 25 bps cut earlier in the year.
For the full financial year 2024-25 (FY25), inflation came down to 4.6%, compared to 5.4% in FY24. The RBI has now lowered its forecast for inflation in FY26 to 4%, down from its earlier estimate of 4.2%. In fact, the central bank has also revised its quarterly forecasts, cutting Q1 projection to 3.6% and Q2 to 3.9%.
During March, the rate of inflation on food fell to 2.69%, the lowest in more than three years. Vegetable prices fell sharply by 7.04%, while eggs and pulses also experienced deflation. Eggs became 3.16% cheaper and pulses by 2.73%.
But there were some areas that experienced price increases nevertheless. Fruit inflation remained in double digits for the third consecutive month, and the price of oil increased by more than 10% for the third consecutive month.
The core inflation, excluding fuel and food, increased to 4.1% in March. Housing and miscellaneous items such as transport, education, and health experienced increased prices. Housing and miscellaneous items increased by 4.99% in March, up from February’s 4.84%.
Fuel and lighting inflation became positive in the first time in 18 months by increasing by 1.46%. Economists, however, feel that this will not last given the decrease in electricity rates by the power distribution companies recently.
Experts feel that the RBI might decrease the rate by up to another 50 basis points in FY26, in case the global economy deteriorates or in the event of further trade woes affecting growth.
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Source: Moneycontrol.
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