Food inflation fell sharply to 3.75 per cent in February from 5.97 per cent in January, reaching its lowest level since May 2023
Down from 4.31 per cent in January, India’s retail inflation has now declined to 3.61 per cent in February 2025, the lowest in seven months. According to data released by the National Statistics Office (NSO), this is the first instance since August 2024 that inflation has fallen below the Reserve Bank of India’s (RBI) medium-term target of four per cent.
The decrease in the Consumer Price Index (CPI) was largely attributed to a significant drop in food prices. Food inflation fell sharply to 3.75 per cent in February from 5.97 per cent in January, reaching its lowest level since May 2023. This decline was driven by lower prices in vegetables, eggs, meat, fish, pulses and dairy products.
Both rural and urban areas experienced a reduction in inflation rates. Rural inflation decreased to 3.79 per cent from 4.59 per cent in January, while urban inflation dropped to 3.32 per cent from 3.87 per cent. Food inflation in rural regions softened to 4.06 per cent from 6.31 per cent, and in urban areas, it declined to 3.20 per cent from 5.53 per cent in the previous month.
“The drop in CPI, well below RBI target of 4 per cent, would not only boost consumer demand but would also help reduce the cost of production for India Inc and result in improvement in corporate balance sheets,” stated Sanjay Nayar, President of Associated Chambers of Commerce and Industry of India (Assocham).
In addition to easing inflation, India’s industrial output showed a stronger-than-expected performance in January 2025. The Index of Industrial Production (IIP) expanded by 5 per cent year-on-year, up from 3.2 per cent in December 2024. This growth was driven by robust performances in the manufacturing and mining sectors.
The RBI had projected CPI inflation for FY 2024-25 at 4.8 per cent, with the January-March quarter estimate at 4.4 per cent. However, with inflation falling below 4 per cent, analysts suggest that the central bank may consider easing its monetary stance to support economic growth. The RBI’s next bi-monthly policy meeting in April 2025 will be closely watched for any repo rate cuts, which could boost borrowing and investment.
Overall, the decline in inflation and the acceleration in industrial output indicate positive economic momentum for India, providing the central bank with potential leeway to adjust monetary policies in support of sustained growth.
