March Retail Inflation Falls to 5-Year Low in India; Food Inflation at 2.69%

India’s retail inflation dropped in March 2025 to its lowest level in 5 years, bringing some relief to both consumers and the government. The Consumer Price Index (CPI) showed annual inflation easing to 3.34%, down from 3.61% in February, marking the lowest figure since August 2019. A sharp drop in food prices largely contributed to this decline, with food inflation softening to 2.69%, the lowest since November 2021.

Falling Food Prices Lead the Way

The standout factor behind the falling inflation rate has been the significant decline in food prices. March saw vegetable prices drop by 7.04% year-on-year, a sharp change to the 1.07% increase in February. Prices of other essentials like pulses, cereals, meat, and milk also witnessed moderation.

For example, pulses fell 2.73% in March compared to a 0.35% fall the previous month, while cereals rose by a modest 5.93%, slightly down from 6.1% in February. This decline in food inflation is a good sign for households, especially those in lower-income groups, as food makes up a large portion of their monthly expenses.

Rural vs Urban Inflation

In rural areas, inflation saw a sharper fall. Headline inflation dropped to 3.25% in March from 3.79% in February. Rural food inflation also fell significantly to 2.82% from 4.06%.

Urban areas, on the other hand, saw a marginal increase in overall inflation from 3.32% to 3.43%, though food inflation still fell to 2.48% from 3.15%. This suggests that while cities are experiencing some price pressures, food prices remain under control across the board.

What It Means for Interest Rates?

The steady decline in inflation has opened the door for more interest rate cuts by the Reserve Bank of India (RBI). In early April, the RBI already cut its key policy rate for the second time this year. Many economists believe that if the current trend continues, two more rate cuts could follow in 2025. Lower interest rates could help boost consumer demand and investment, both of which are crucial to supporting India’s growth amid global uncertainty.

Core Inflation and Other Key Trends

Core inflation, which excludes food and fuel, rose slightly to around 4.1%, reflecting moderate domestic demand. Other essential categories also saw small increases:

• Housing inflation rose to 3.03% from 2.91%

• Health inflation moved to 4.26% from 4.12%

• Education inflation edged up to 3.98% from 3.83%

• Transport and communication saw an increase to 3.30% from 2.93%

• Fuel and light inflation showed a recovery too, jumping from -1.33% in February to 1.48% in March.

Items with the Highest and Lowest Inflation

In terms of individual items, coconut oil (56.81%), coconut (42.05%), gold (34.09%), silver (31.57%), and grapes (25.55%) recorded the highest inflation rates in March. Conversely, prices of items like ginger (-38.11%), tomato (-34.96%), cauliflower (-25.99%), jeera (-25.86%), and garlic (-25.22%) dropped significantly.

Conclusion

The fall in retail inflation, especially in food, is a positive signal for India’s economy. With the RBI expecting normal monsoon rains this year, agricultural output may improve further, helping keep inflation under control. While global uncertainties still pose risks, the current trend offers optimism.

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