Experts state that retail inflation is expected to remain well within the RBI’s target band due to predicted normal monsoon and decreasing international crude oil prices
India’s consumer price index (CPI)-based retail inflation has now eased to 3.34 per cent in March 2025, after falling to a seven-month low of 3.61 per cent in February 2025. This is the lowest year-on-year (YoY) inflation after August 2019, the government data showed on Tuesday.
The data showed that rural inflation declined from 3.79 per cent in February 2025 to 3.25 per cent in March 2025. On the other hand, urban inflation marked an uptick and rose to 3.43 per cent in March 2025 as compared to 3.32 per cent in February 2025.
“Year-on-year inflation rate based on All India Consumer Price Index (CPI) for March 2025 over March 2024 is 3.34 per cent (provisional). There is a decline of 27 basis points in the headline inflation of March 2025 in comparison to February 2025. It is the lowest year-on-year inflation after August 2019,” the Ministry of Statistics and Programme Implementation (MoSPI) stated.
Downward Trend In Food Inflation
The downward trend in retail inflation was mainly attributed to an easing in food inflation. Measured by the consumer food price index (CFPI), food inflation declined sharply to 2.69 per cent during the month as compared to 3.75 per cent in February 2025, the data showed.
“The softer-than-expected CPI inflation will provide further comfort to RBI to continue to prioritise growth. We retain our view that RBI will continue on its accommodative stance with the terminal repo rate likely around 5 to 5.25 per cent,” stated Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
Inflation in food and beverage fell to 2.9 per cent in March, down from 3.8 per cent in February. Deflation in vegetables, pulses and egg prices have deepened, further aiding moderating food inflation. Spices also remained in the deflationary zone. However, double-digit inflation in edible oils (17.1 per cent) and fruits (16.3 per cent) somewhat capped the moderation to some extent, as per a report by CareEdge Ratings.
Housing Inflation And New CPI Series
Housing inflation rose to 3.03 per cent in March 2025 as compared to 2.91 per cent in February 2025. However, the housing index is compiled for urban sector only. With consumption patterns undergoing a shift and the emergence of rental markets beyond urban hubs, the new consumer price index (CPI) series in 2026 will measure rural housing inflation, as per the media reports.
“The thali index from Crisil Intelligence research released recently had noted that the cost of home-cooked vegetarian thali had fallen three per cent on-year in March, while that of a non-vegetarian thali remained unchanged. The Indian Meteorological Department’s forecast of an above-normal monsoon for 2025 and Skymet’s of a normal one adds to the happy tidings on the food inflation front,” highlighted Dharmakirti Joshi, Chief Economist, Crisil.
Future Outlook
As far as the future projections are concerned, highlighting that the outlook for food inflation has turned decisively positive and headline inflation moderated during January-February 2025, Sanjay Malhotra, the Reserve Bank of India (RBI) Governor has stated that assuming a normal monsoon, the consumer price index (CPI) inflation for the financial year 2025-26 is projected at four per cent.
“Moving ahead, CPI inflation is expected to remain well within the RBI’s target band due to predicted normal monsoon and decreasing international crude oil prices. The crude prices are expected to be range-bound between USD 60 to USD 65 per barrel in the short to medium term, further boosting private final consumption expenditure and hence bolstering economic growth,” Hemant Jain, President, PHD Chamber of Commerce and Industry (PHDCCI), highlighted in a press statement.
The continued softening of inflation augurs well for the economy. Industry experts believe that the softening of CPI inflation will boost India’s private final consumption expenditure, the largest component of gross domestic product (GDP). It will further give comfort to RBI to reduce interest rates in the next bi-monthly MPC meeting, which will reduce industries’ debt burden.
