NEW DELHI: Retail inflation slowed to a more than 5-year low in March on the back of sharply moderating food prices, paving the way for the Reserve Bank of India (RBI) to cut interest rates in the months ahead to support growth against the backdrop of global uncertainty.
Data released by the National Statistical Office (NSO) on Tuesday showed retail inflation, as measured by the consumer price index (CPI), rose an annual 3.3% in March, slower than the previous month’s 3.6% and below the 4.9% in March last year. The food price index slowed to 2.7% in March, lower than the 3.8% in Feb and below the 8.5% in March last year. Rural inflation was at 3.3% in Feb while urban was at 3.4%.
The data showed that there is a decline of 27 basis points in headline inflation of March compared to Feb and it is the lowest year on-year inflation after Aug, 2019. There was a sharp decline of 106 basis points in food inflation in March compared to Feb and the food inflation during the month is the lowest after Nov, 2021.
The decline in headline inflation and food inflation during the month of March, 2025 is mainly attributed to fall in inflation of vegetables, eggs, pulses & products, meat & fish, cereals & products and milk & products.
“With multi-year low inflation this month and benign inflation expectations going forward, we expect rate cuts of 50 basis points in June and Aug. We believe the cumulative rate cuts could be now more than 100 basis points with an increasingly uncertain growth environment,” said Soumya Kanti Ghosh, group chief economic adviser at SBI.
Experts said that they expect retail inflation to stay at comfortable levels due to easing food inflation but said the impact of geopolitical tensions and weather-related events need to be watched.
“Going ahead, we project CPI inflation to stay at comfortable levels supported by moderating food inflation. For FY26, we expect CPI inflation to average 4.2%,” said Rajani Sinha, chief economist at rating agency CareEdge.
Separate data showed wholesale price inflation moderated to a 6-month low of 2.1% in March from 2.4% in feb due to lower food prices, providing fresh relief from the stubborn price pressures.