New Delhi: India's retail inflation dipped marginally to a nearly six-year low of 3.34 per cent in March due to a decline in prices of vegetables and protein-rich items. 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.
Besides this, food inflation also declined. 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. Corresponding inflation rates for rural and urban areas are 2.82% and 2.48%, respectively.
According to data released by the Ministry of Statistics & Programme Implementation (MoSPI), a sharp decline of 106 basis points is observed in food inflation in March 2025 in comparison to February 2025. The food inflation in March 2025 is the lowest after November 2021.
According to the data, the decline in headline inflation and food inflation is mainly attributed to the decline in inflation of vegetables, eggs, pulses and meat and fish. A sharp decline in headline and food inflation in the rural sector was observed in March. The headline inflation is 3.25% (provisional) in March 2025 while the same was 3.79% in February 2025. The CFPI-based food inflation in the rural sector is observed as 2.82% in March 2025 in comparison to 4.06% in February 2025.
If we talk about urban inflation, there has been a marginal increase from 3.32% in February 2025 to 3.43% (Provisional) in March in headline inflation. However, a significant decline is observed in food inflation from 3.15% in February 2025 to 2.48%. Fuel and light inflation is at 1.48%, Education inflation is at 3.98%, Health inflation rate is at 4.26%, and Transport & communication inflation rate for March is 3.30%.
The top five items showing highest year on year Inflation at All India level in March are coconut oil (56.81%), coconut (42.05%), gold (34.09%), silver (31.57%) and grapes (25.55%); while key items having lowest year on year inflation ginger (-38.11%), tomato (-34.96%), cauliflower (-25.99%), jeera (-25.86%) and garlic (-25.22%).
States With Inflation Above National Average
- Kerala: 6.59%
- Karnataka: 4.44%
- Chhattisgarh: 4.25%
- Jammu and Kashmir: 4%
- Maharashtra: 3.86%
States With Inflation Below National Average
- Telangana: 1.06%
- Delhi: 1.48%
- Jharkhand: 2.08%
- Rajasthan: 2.66%
- Gujarat: 2.63%
Last week, the Reserve Bank reduced the key short-term lending rate (repo) by 25 bps 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.
Expert Views
Rajani Sinha, Chief Economist, Care Ratings
The CPI inflation moderated to 3.3% in March, lower than our expectations, aided by a sustained fall in food inflation. Core inflation also remained benign at 4.1% despite a marginal uptick. Interestingly, the fuel and light category exited deflation after staying in the deflationary zone for 18 consecutive months. However, this trend in fuel and light is unlikely to be sustained as DISCOMS of some major states have slashed electricity prices.
Agricultural production is seen at a record high in 2024-25 as per the Second Advance Estimate. Encouraging prospects for agricultural production, the arrival of fresh Rabi harvest, and comfortable reservoir levels are positives for food inflation. The prices of edible oils remain a key concern, especially given the contraction in the sowing of oil seeds, an increase in global edible oil prices, and import dependency in this category. Food inflation is likely to remain comfortable in the coming months. However, we need to be cautious of any weather-related disruptions. The imposition of U.S. tariffs has further heightened concerns over dumping, as these measures could lead to an oversupply in global markets due to surplus production from China.
For FY26, we expect CPI inflation to average 4.2%. While commodity prices have cooled off, trade policy uncertainties and geopolitical tensions remain monitorable, given their implications on global supply chains. On the monetary policy front, the growing risk to domestic growth from external developments and comfort on the inflation front has resulted in the RBI cutting its policy rate by another 25 bps in April. We expect a further 50 bps reduction in the policy rate in FY26. The possibility of the RBI's rate cut cycle being even deeper cannot be ruled out if the global trade uncertainties severely dent growth prospects. The recent moderation in the dollar index and expectations of more Fed rate cuts place the RBI in a better position to undertake further reductions in the policy rate.
Aditi Nayar, Chief Economist & Head - Research ICRA
The unexpectedly sharp sequential fall in the headline CPI inflation in March 2025 was predominantly led by food items, such as meat, eggs and vegetables, whereas a number of other groups reported a modest rise in inflation. A rise in temperatures going ahead could raise prices of perishables in the coming weeks. While the initial forecast of an above-normal monsoon is encouraging, the timing and distribution will be key for the implications for agri output and food inflation going ahead. 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%, a June 2025 rate cut seems highly likely, unless Q4 FY2025 GDP growth surprises sharply to the upside.
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