Retail inflation dips to 3.34% in March on subdued food prices

Retail inflation dipped marginally to a nearly six-year low of 3.34 per cent in March due to decline in prices of vegetables, eggs and protein-rich items, raising hope for a third rate cut by the RBI as it remains below the median target of 4 per cent.

The Consumer Price Index (CPI) based inflation was 3.61 per cent in February and 4.85 per cent in March last year.

The inflation rate in March 2025 is the lowest since August 2019, when it was 3.28 per cent.

According to data released by National Statistics Office (NSO) on Tuesday, the retail food inflation in March was 2.69 per cent compared to 3.75 per cent in February and 8.52 per cent in March 2024.

Meanwhile, wholesale price inflation declined to a six-month low of 2.05 per cent in March as prices of vegetables, potato and other food items eased, another set of government data showed.

Wholesale Price Index (WPI) based inflation was 2.38 per cent in February. It was 0.26 per cent in March last year.

Last week, the Reserve Bank reduced the key short-term lending rate (repo) by 25 basis points in the wake of easing inflation. The Reserve Bank has projected CPI inflation for the current fiscal 2025-26 at 4 per cent, with Q1 at 3.6 per cent, Q2 at 3.9 per cent, Q3 at 3.8 per cent, and Q4 at 4.4 per cent. The risks are evenly balanced.

While announcing the bi-monthly monetary policy on April 9, the RBI had indicated another rate cut as it changed the monetary stance to ‘accommodative’ from ‘neutral’.

The NSO said the significant decline in headline inflation and food inflation during March was mainly attributed to decline in inflation of vegetables, eggs, pulses and products, meat and fish, cereals and products, and milk and its products.

Commenting on the NSO data, Aditi Nayar, Chief Economist, ICRA said the unexpectedly sharp sequential fall in the headline CPI inflation in March 2025 was predominantly led by food items.

“In our view, further monetary easing is clearly on the table, to the tune of 50 bps over the next three policies. With the next inflation print also expected to be sub-4 per cent, a June 2025 rate cut seems highly likely,” Nayar said.

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