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India’s retail inflation further eased to 3.34 per cent in March from a seven-month low of 3.61 per cent in February, according to government data released on Tuesday. This is the lowest year-on-year inflation reading since August 2019, the Ministry of Statistics & Programme Implementation said.
The sharp fall was mainly due to a steep drop in food prices. Food inflation, measured by the Consumer Food Price Index (CFPI), fell to 2.69 per cent in March from 3.75 per cent in February-- the lowest level since November 2021, the ministry said. Prices of vegetables, eggs, pulses, meat and fish, cereals, and milk products contributed most to the decline.
The Consumer Price Index (CPI)-based inflation remains comfortably within the Reserve Bank of India’s (RBI) medium-term target of 4 per cent and well inside the 2-6 per cent tolerance band.
Rural vs urban inflation
Rural inflation dropped to 3.25 per cent from 3.79 per cent in February. Rural food inflation fell to 2.82 per cent from 4.06 per cent.
Meanwhile, urban inflation inched up to 3.43 per cent from 3.32 per cent, but food inflation fell sharply to 2.48 per cent from 3.15 per cent. Housing inflation (urban only) rose slightly to 3.03 per cent from 2.91 per cent.
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Fuel and light inflation
Fuel and light inflation turned positive at 1.48 per cent, reversing a deflation of 1.33 per cent in February. The data points to strong disinflationary trends, especially in food, with rural areas seeing the biggest relief.
Wholesale inflation eases to 2.05 per cent in March
India’s wholesale price index (WPI)-based inflation eased to 2.05 per cent in March, down from 2.38 per cent in February, according to data released by the Ministry of Commerce and Industry earlier today. The slight decline was largely driven by a drop in prices in the food and fuel and power categories, even as prices of manufactured goods continued to inch upwards.
WPI tracks the average changes in prices of goods traded in bulk at the wholesale level, offering insights into supply and demand dynamics in sectors like manufacturing and construction. Unlike the CPI, which measures retail inflation experienced by consumers, WPI focuses on price movements earlier in the supply chain.
RBI FY26 inflation forecast
For the ongoing financial year (FY26), the RBI projects CPI-based inflation at 4.0 per cent, assuming a normal monsoon. Retail inflation is expected to ease in the first half of the year, with quarter-wise estimates at 3.6 per cent in Q1, 3.9 per cent in Q2, and 3.8 per cent in Q3. However, inflation is expected to rise slightly towards the end of the fiscal year, reaching 4.4 per cent in Q4.
Earlier this month, the RBI Monetary Policy Committee (MPC) unanimously voted to cut the repo rate by 25 basis points to 6.0 per cent, marking the second consecutive rate reduction. The reduction is aimed at supporting growth while keeping inflation within target. The RBI has also changed its stance to 'accommodative,' which indicates that future rate cuts may follow.
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