NEW DELHI: India’s core inflation outlook remains positive despite rising industrial metal prices, a report by ICICI Bank Global Markets revealed.
Core inflation remained higher in February, majorly due to a surge in gold prices. Meanwhile, stable global edible oil prices and expectations of a normal monsoon point to a positive outlook for food inflation in the coming months.
However, uncertainties remain, as global market factors like trade tariffs and volatile fertiliser costs may influence food prices.
On the domestic front, the demand-supply outlook also appeared balanced, with a high base effect assisting in keeping food inflation moderate over the next year.
IN FY26, inflation is predicted to average 4.2 per cent year-on-year (YoY), in line with the apex bank’s target. A normal monsoon, a stable rupee, and declining energy prices suggest a supportive inflation environment.
However, global factors including trade policies, capital flows, and commodity price movements could result in fresh uncertainty.
India’s retail inflation dropped to a seven-month low of 3.61 per cent YoY in February 2025, down from 4.26 per cent in January. This was mainly driven by a sharp fall in food inflation, which declined to 3.75 per cent annually in February against the 6.0 in the previous month.
A stable monsoon, steady currency exchange rates, and lower energy prices are expected to keep inflation in control over the coming months. While vegetable prices could rise during the summer, the high base effect from last year should prevent a sharp increase in overall food inflation.
The expected rise in rabi crop output, particularly wheat and cereals, should also help stabilise food prices. However, edible oils and sugar prices may see some upward pressure due to global market trends and a dip in sugarcane production.
Despite the rise in industrial metal prices, a stable Indian rupee and weak global energy demand are likely to keep core inflation contained. Oil prices declined in March due to increased production from OPEC and lower energy consumption in the US, helping to ease energy-related inflationary pressures.
With inflation coming in below the RBI’s Q4 FY25 projection of 4.4 per cent, analysts believed the Monetary Policy Committee (MPC) could opt for an interest rate cut in April. Latest data now pegs Q4 FY25 inflation at 3.9 per cent, giving the central bank room to ease its policy stance.