Retail inflation likely declined to a 6-month low of 3.8% in February

India's inflation likely declined in February as per MC poll

India’s retail inflation likely continued its downward trend to decline to a six-month low of 3.8 percent in February as food prices edged lower, a Moneycontrol poll of 19 economists has found, boosting chances of another rate cut in April.

Retail inflation slipped to a five-month low of 4.3 percent in the previous month.

“Moderation in headline inflation led by food inflation. Within food, moderation is led by a continued winter season decline in vegetable prices and, more encouragingly, moderation in pulses and cereal prices. Core inflation is expected to be firmer with the rise in gold prices,” said Gaura Sengupta, chief economist, IDFC First Bank.

The poll was conducted between March 5 and 7.

Food inflation slipped below 8 percent for the first time in five months in January, as prices fell to 6.02 percent from 8.4 percent.

“Broad-based moderation in food inflation, led by perishables, is likely to be the main reason behind the slower headline print in February,” said Radhika Rao, senior economist, DBS Bank.

She expects the CPI inflation to ease a shade below the mid-point of the target range as vegetables continue to contract sequentially, alongside pulses and other protein sources.

Non-food segments are expected to stay benign, with the core to stay at non-threatening levels below 4 percent, Rao said.

The decline was instrumental in the Reserve Bank of India cutting the policy rate for the first time in five years to 6.25 percent from 6.5 percent.

The drop in retail prices in February is expected to boost the chance of another repo rate cut when the central bank’s monetary policy committee meets in early April.

Over 90 percent of economists in a Moneycontrol poll conducted ahead of the GDP data release on February 28 predicted a further 25 basis points (bps) rate cut in the April meeting. They projected the rate to be reduced to 5.75 percent by the end of FY26.

“Two consecutive benign CPI readings ahead of the MPC meet would confer additional 25 bps reduction when they meet in April,” said Siddharth Kothari, economist, Sunidhi Securities.

India’s inflation is likely to settle at 4.8 percent in FY25, according to the RBI forecast and further to 4 percent in the second quarter of FY26.

The Moneycontrol poll pegged the range of forecasts from 3.4 to 4.1 percent.