India’s retail inflation eases to 67-month low of 3.34% in March

India's inflation remained subdued in March

India’s inflation eased to a 67-month low of 3.34 percent in March compared with 3.61 percent in the previous month, as food inflation declined further, with economists firming up their expectations of a further rate cut in June policy meeting of the Reserve Bank of India, according to data released on April 11.

"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. This validates the central bank’s decision to shift to an accommodative stance, along with a rate cut at the April meeting. We maintain our call for further easing in June,” said Radhika Rao, senior economist, DBS Bank.

March marks the second consecutive month that retail inflation remained below the RBI’s target rate of 4 percent. The reading comes a week after the central bank delivered its second consecutive rate cut of 25 bps. The policy rate now stands at 6 percent compared with 6.5 percent at the start of the year.

The economy ended the year with 4.6 percent in inflation in FY25 compared with 5.4 percent in FY24.

Reserve Bank of India expects inflation to dip further to 4 percent in the coming year. In its latest meet, the central bank’s monetary policy committee revised inflation forecast downward to 4 percent from 4.2 percent expected earlier.

"We expect a further 50 bps reduction in the policy rate in FY26. The possibility of the RBI's rate cut cycle being even deeper cannot be ruled out if the global trade uncertainties severely dent growth prospects. The recent moderation in the dollar index and expectations of more Fed rate cuts place the RBI in a better position to undertake further reductions in the policy rate,” said Rajani Sinha, chief economist, CareEdge.

The central bank sharply revised its Q1 forecast downward to 3.6 percent from 4.5 percent, also lowering Q2 forecast to 3.9 percent from 4 percent projected earlier.

Food inflation eases, core picks up

Food inflation declined to a 40-month low of 2.69 percent in March as against 3.75 percent in February, as vegetables, eggs, pulses slipped further into deflation during the month.

Vegetable deflation widened to 7.04 percent compared with 1.13 percent in the previous month, while eggs deflation stood at 3.16 percent compared with 2.96 percent in February.

Pulses deflation was at 2.73 percent, nearly 2 percentage points higher from the previous month.

On the other hand, oil and fruits witnessed a rise in inflation in March. Fruit inflation has remained in double digit for a third consecutive month, while oil inflation has been over 10 percent for a third month.

Core inflation firmed up further to 4.1 percent in March, as housing and miscellaneous items witnessed a rise in inflation. Miscellaneous inflation was up 4.99 percent in March compared with 4.84 percent in the previous month, as education, transportation and health prices increased faster compared with the previous month.

Fuel and light exited deflation for the first time in 18 months, as prices increased 1.46 percent. But economists contend that the trend is unlikely to sustain as discoms have cut electricity prices.

"For FY26, we expect CPI inflation to average 4.2 percent. While commodity prices have cooled off, trade policy uncertainties and geopolitical tensions remain monitorable, given their implications on global supply chains," Sinha from CareEdge noted.