Retail inflation eases to a 5.5 year low of 3.34% in March 2025 as food gets cheaper

Retail inflation eased to a five-and-a-half-year low of 3.34% in March, from 3.61% in the previous month, mostly due to lower food prices, according to data from the Ministry of Statistics and Programme Implementation. Vegetables, eggs, and pulses were significantly cheaper, though edible oils and fruits continued to see high inflation.

The slowing prices come on the heels of two consecutive repo rate cuts, each by 25 basis points or 0.25%, by the Reserve Bank of India. This is the rate at which banks borrow from the RBI, and the cuts indicated that the central bank is more worried about growth than inflation. Economists predicted further reductions in the months ahead.

“The softer than expected [Consumer Price Inflation] 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%,” said Upasna Bharadwaj, the chief economist at Kotak Mahindra Bank.

Food inflation at 3-year low

Consumer food price inflation (CFPI) hit a three-year low of 2.7% in March, a sharp drop from 3.75% in the previous month, according to data from the Centre for Monitoring Indian Economy (CMIE).

Among major crops, tomato prices plunged almost 35% in March the reporting month, steeper than the 29% deflation in February. Potato prices rose 2.3%, which was the lowest in a little more than a year. The kitchen staple’s price had increased 26% in the previous month. Onion prices increased 19% in March, from 30% in the previous month. Overall, vegetable prices deflated 7% for the second consecutive month. Pulses and products prices deflated 2.7% in March, while egg prices fell over 3%. Rice and wheat prices rose 4.9% and 9% in March, lower than the 5.3% and 9% gains of the previous month.

Fuel prices up

Fuel and light inflation increased moderately to 1.48%, with prices rising for the first time since September 2023.

Rural inflation came in at a lower 3.25% in March, down from  3.79% in February, though urban inflation increased marginally from 3.32% in February to 3.43% in March.

Kerala had the highest inflation of 6.6% followed by Chhattisgarh, Maharashtra, Tamil Nadu, Karnataka, Assam and Haryana which all had inflation of above 3.3%. Inflation was lowest in Delhi and Telangana coming in at 1.5% and 1.1% respectively.

The CPI data moved in the same direction as the wholesale price inflation data, which was released on the same day by the Commerce Ministry. Wholesale prices eased 2.05% in March, from 2.38% in February. Primary articles prices increased at a modest 0.76% in March, down from 2.8% in the previous month. Fuel and power prices increased 0.2 % from a deflation of 0.7% in February 2025. Prices of manufactured goods too increased 3.07% in March, from 2.86% in the previous month. The WPI food index increased at a slower pace of 4.66% in March 2025 from 5.9% in the previous month.

Rate cuts likely

Economists agreed that the inflation is likely to stay under 4% in the coming months, which they said would prompt a 50 bps rate cut.

Vivek Rathi, the national director of research at Knight Frank India, said 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. “As household prices remain elevated, it is crucial for commercial banks to pass on the benefits of rate cuts to consumers to support domestic consumption and growth. This is also vital for boosting housing demand in the affordable segment,” he said.