India's Retail Inflation Drops to 3.34%: Lowest Since 2019 as Food Prices Cool

India's Retail Inflation Eases to 3.34%: Lowest Since 2019

April 15, 2025 - India's retail inflation has dropped to a five-and-a-half-year low of 3.34% in March, down from 3.61% in February, primarily driven by cooling food prices, according to the latest data released by the Ministry of Statistics and Programme Implementation.

Food Inflation Reaches Three-Year Low

The consumer food price inflation (CFPI) hit a remarkable three-year low of 2.7% in March, showing a significant decline from the 3.75% recorded in February. This substantial cooling in food prices has been a key factor in bringing overall inflation to its lowest level since 2019.

Several essential food items witnessed notable price reductions:

• Tomato prices plunged dramatically by almost 35% in March, steeper than February's 29% deflation
• Vegetable prices overall deflated by 7% for the second consecutive month
• Pulses and products prices experienced a 2.7% deflation
• Egg prices fell by over 3%

However, not all food categories saw price reductions. Rice and wheat prices increased by 4.9% and 9% respectively in March, though these figures were slightly lower than or equal to the previous month's increases of 5.3% and 9%.

Fuel and Regional Inflation Trends

Fuel and light inflation increased moderately to 1.48%, marking the first price rise in this category since September 2023. This slight uptick in energy costs was not enough to offset the overall downward trend in inflation.

Regional inflation data revealed interesting patterns across India:

• Rural inflation decreased to 3.25% in March from 3.79% in February
• Urban inflation increased marginally from 3.32% in February to 3.43% in March

State-wise inflation showed considerable variation:

• Kerala recorded the highest inflation rate at 6.6%
• Chhattisgarh, Maharashtra, Tamil Nadu, Karnataka, Assam, and Haryana all registered inflation above 3.3%
• Delhi and Telangana enjoyed the lowest inflation rates at just 1.5% and 1.1% respectively

Wholesale Prices Also Show Moderation

The wholesale price inflation (WPI) data, released simultaneously by the Commerce Ministry, aligned with the CPI trend, easing to 2.05% in March from 2.38% in February.

Key components of the WPI showed mixed movements:

• Primary articles prices increased modestly by 0.76%, down from 2.8% in February
• Fuel and power prices rose by 0.2%, reversing the previous month's 0.7% deflation
• Manufactured goods prices increased by 3.07%, up slightly from 2.86% in February
• The WPI food index rose at a slower pace of 4.66%, compared to 5.9% in February

RBI's Rate Cuts and Future Outlook

The slowing inflation comes after the Reserve Bank of India implemented two consecutive repo rate cuts of 25 basis points (0.25%) each. These reductions in the rate at which banks borrow from the RBI signal that the central bank is currently more concerned about economic growth than inflation.

Economic experts predict that inflation will likely remain below the 4% mark in the coming months, potentially paving the way for further monetary policy easing.

Upasna Bharadwaj, Chief Economist at Kotak Mahindra Bank, noted: "The softer than expected CPI will provide further comfort to the RBI to continue to prioritise growth. We retain our view that the RBI will continue on its accommodative stance with the terminal repo rate likely around 5% to 5.25%."

Most economists anticipate an additional 50 basis points rate cut in the near future, which could further stimulate economic activity and lending.

Impact on Housing and Consumption

While food and fuel inflation have moderated, some analysts point to persistent inflationary pressures in other household expense categories.

Vivek Rathi, National Director of Research at Knight Frank India, highlighted that "excluding the food and fuel basket, inflationary pressures persist among households, potentially tightening consumption expenditure, especially for lower-income households that are more sensitive to price increases."

He emphasized the importance of commercial banks passing on the benefits of rate cuts to consumers to support domestic consumption and growth, noting this is "also vital for boosting housing demand in the affordable segment."

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Categories: economic outlook, food inflation, India retail inflation, RBI rate cuts