India’s Retail Inflation at Multi-Year Low in March 2025

Inflation Eases to 3.34% as Food Prices Decline, Paving the Way for Economic Recovery

India’s retail inflation, measured by the Consumer Price Index (CPI), has reached a multi-year low of 3.34% in March 2025, the slowest pace since August 2019. The Ministry of Statistics and Programme Implementation (MoSPI) reported this significant easing, driven largely by a substantial drop in food prices.

March’s retail inflation rate marked a decrease from 3.61% in February and a sharp decline from the 4.85% observed in the same period last year. Food inflation, a critical component of the CPI, rose by only 2.69% year-on-year in March, down from 3.75% in February and a staggering 8.52% a year ago.

Economists’ Insights

A Mint poll of 14 economists had predicted a modest reduction in retail inflation to 3.5% for March, following a 3.6% rate in February. This marks the second consecutive month where inflation remained below 4%, the longest such streak in five years.

The Reserve Bank of India’s (RBI) Monetary Policy Committee recently cut the policy repo rate by 25 basis points to 6%, in light of this declining inflation. The RBI’s accommodative stance aims to bolster growth as GDP growth forecasts for 2025-26 are revised down to 6.5% from 6.7%.

Sector-wise Analysis

Economists assert that the moderation in retail inflation is primarily due to a seasonal correction in food prices, especially vegetables, eggs, and pulses. However, inflation for fuels and core segments like precious metals, transport, and education edged up.

Radhika Rao from DBS Bank noted, “The downside surprise in headline inflation was due to the deeper correction in food costs, despite core inflation rising 4.1% on-year.” This reflects a broader inflationary trend, as the RBI’s quarterly projection for Jan–Mar undershot significantly.

Regional Variations

Of particular note, 12 out of India’s 22 states recorded inflation below the national average of 3.34% in March. States like Andhra Pradesh, Bihar, Delhi, and Gujarat led this trend, benefitting from the easing prices of cereals and other staples due to a favorable kharif output.

The significant improvement in inflation rates arrives as a relief for many households, with the food and beverages category rising by 2.88% annually, down from a 3.84% growth in February. Meanwhile, clothing and footwear saw a minor annual increase of 2.62% in March.

Policy Implications and Future Outlook

With these developments, the RBI may maintain its focus on supporting economic growth over curbing inflation, given the CPI’s recent sub-target performance. “The softer than expected CPI inflation will provide further comfort to the RBI to continue prioritizing growth,” commented Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.

The slowdown in inflation is expected to stimulate consumer demand as the new fiscal year begins, providing additional support to India’s fragile economic recovery. Analysts at India Ratings and Research note the contribution of better kharif crop output to the deceleration in food inflation, likely benefiting consumption trends in the near term.

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