India’s retail inflation hits multi-year low at 3.34% in March, lowest since August 2019

India's retail inflation eased in March to its slowest pace in over six years (since August 2019) on the back of lower food prices, showed provisional government data released on Tuesday.

Retail inflation, based on the Consumer Price Index (CPI), rose by 3.34% annually in March, lower than the 3.61% registered in February and 4.85% reported in the year-ago period, according to the ministry of statistics and programme implementation (MoSPI) data.

Interestingly, food inflation eased in the month, rising 2.69% year-on-year, down from 3.75% in February and 8.52% a year ago.

Also Read: The state of India’s economy is not as bright as GDP data may suggest

A Mint poll of 14 economists projected an easing of retail inflation to 3.5% in March from 3.6% in February, marking the second consecutive month of sub-4% print and the longest streak of continuous inflation easing in at least five years.

This follows the Reserve Bank of India’s (RBI) Monetary Policy Committee unanimously cutting the policy repo rate by 25 basis points (bps) to 6% at its 54th meeting last week. One basis point is one-hundredth of a percentage point.

After reporting a 6.4% growth during the December quarter, the slowest since Q4FY23, barring one quarter, economists now widely expect the central bank to opt for a rate cut in June. 

Food prices fall

Economists note that retail inflation eased in March 2025 to the lowest since August 2019, driven by a continued seasonal correction in food prices, though the decline remained uneven, as fuel and light and core inflation edged up during the same period.

The latest retail inflation data also supports the central bank’s shift to an accommodative stance and its decision to cut rates in April, with expectations of further easing in June.

"The downside surprise in headline inflation reflected a deeper correction in food costs, led by a sequential decline in vegetables, eggs, and pulses. By contrast, core inflation rose by 4.1% on-year, driven by increases in precious metals, transport, and education," said Radhika Rao, executive director and senior economist at DBS Bank.

Also Read: Keep track of trade turbulence amid a scenario of benign inflation

"Despite a firmer core, Jan–Mar headline inflation not only undershot the RBI’s quarterly projection by a wide margin but also fell below the RBI’s target range," Rao added.

To be sure, the RBI aims to keep CPI inflation at 4%, within a ±2% range.

Interestingly, food prices have remained elevated for some time, staying above the 7% mark from November 2023 to June 2024, primarily due to the previous year's uneven and below-normal monsoon rains.

While the overall food inflation is slowing, the prices of key food items like fruit have remained high.

During March, the prices of cereals, meat and fish, eggs, vegetables, milk and pulses rose at a slower pace than the previous month, while prices of fruit, oil and fats saw an increase.

Overall, the inflation for food and beverages rose by 2.88% annually in March, down from the 3.84% annual growth reported in February.

The price of clothing and footwear rose by 2.62% annually in March, lower than the 2.68% rise reported in February.

“The prices of vegetables were down 7.0% on-year, the sharpest pace of decline since May 2023, thereby pulling the food inflation down to a 40-month low. In addition, prices of pulses were down 2.7% on-year in the same period, the fastest fall in prices in over six years (February 2019: 3.8%),” said Paras Jasrai, associate director at India Ratings and Research.

“Even the cereals inflation was down to a 33-month low of 5.9% due to better kharif output. The easing of food inflation is expected to bring relief to households and support consumption demand as the new fiscal year begins,” he added.

Interestingly, 12 of the 22 states reported inflation below the 3.34% mark in March—Andhra Pradesh, Bihar, Delhi, Gujarat, Himachal Pradesh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Telangana, Uttar Pradesh, and West Bengal.

Breather for the RBI

Last week, the RBI's Monetary Policy Committee also trimmed India’s gross domestic product (GDP) growth forecast for 2025-26 to 6.5%, down from 6.7%.

After the monetary policy decision, RBI governor Sanjay Malhotra said India's GDP growth forecasts were marked down by 20bps due to global trade and policy uncertainties, especially over the impact of unexpectedly steep Donald Trump-era tariffs on Asia’s third-largest economy.

Also Read: Mint Quick Edit | Inflation: In RBI’s control at last?

Thus, the RBI's focus may shift from curbing inflation—forecast at 4% in 2025-26, with quarterly estimates at 3.6% in Q1, 3.9% in Q2, 3.8% in Q3, and 4.4% in Q4—to boosting credit and supporting an economy set to slow in 2025-26.

“The softer than expected CPI inflation will provide further comfort to the RBI to continue to prioritize growth,” said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank.

“We retain our view that the RBI will continue on its accommodative stance with the terminal repo rate likely around 5-5.25%,” Bhardwaj added.