(Reuters) – India’s retail inflation eased to 3.34% in March, the slowest pace in over five years, as food prices continued to soften, government data released on Tuesday showed.
March retail inflation was below economists’ estimate of 3.60%. Inflation for February was 3.61%. The March inflation was the lowest since August 2019, the government said in a statement.
COMMENTARY:
DIPANWITA MAZUMDAR, ECONOMIST, BANK OF BARODA, MUMBAI:
“Headline CPI is getting repeated breather from a softer food inflation. The outlook also remains bright with improved Rabi sowing and better Kharif production in place. High frequency price data of April also hints at some degree of softening, albeit at a softer pace than March.”
“What needs to be watched at this current juncture is the pass-through of global tariff policies on inflation front. However, India is much guarded, as for imported inflation, WPI is more susceptible than CPI, and the former is largely capped.”
GAURA SEN GUPTA, INDIA ECONOMIST, IDFC FIRST BANK, MUMBAI:
“The moderation in CPI inflation is led by food inflation with continued decline in vegetable. Looking ahead, we expect CPI inflation to average at 3.5% in FY26, with expectation of evenly distributed monsoon. Based on domestic factors alone, we see space for another two rate cuts minimum in remainder of 2025. We don’t rule out the possibly of a third rate cut, if global growth conditions weaken further.”
“Core inflation remains near historical lows, indicating negative output gap. The tariff escalation add downside risk to inflation with decline in commodity prices due to growth weakness. Moreover, exporters will try to find new markets as entry into U.S. becomes tougher.”
KANIKA PASRICHA, CHIEF ECONOMIC ADVISOR, UNION BANK OF INDIA, MUMBAI:
“CPI clocked 3.34%, even below our consensus estimate of 3.46%. As expected, food stayed the prime driver of cooling in inflation, while core inflation picked up to 4% handle, primarily led by gold (with close to 80-90 bps contribution).”
“We see underlying inflation pressures as staying benign unless weather plays spoilsport. That said, IMD forecast of above-normal monsoon helps. This makes us expect another 50bps repo rate cut by August, with monetary policy likely to continue to do the growth heavy lifting in an uncertain world.”
ADITI NAYAR, CHIEF ECONOMIST, ICRA, MUMBAI:
“The unexpectedly sharp sequential fall in the headline CPI inflation in March 2025 was predominantly led by food items, such as meat, eggs and vegetables, whereas a number of other groups reported a modest rise in inflation.”
“A rise in temperatures going ahead could raise prices of perishables in the coming weeks. While the initial forecast of an above-normal monsoon is encouraging, the timing and distribution will be key for the implications for agri output and food inflation going ahead.”
“In our view, further monetary easing is clearly on the table, to the tune of 50 bps over the next three policies. With the next inflation print also expected to be sub-4%, a June 2025 rate cut seems highly likely, unless Q4 FY2025 GDP growth surprises sharply to the upside.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“The downside surprise in headline inflation reflected the deeper correction in food costs, led by sequential decline in vegetables, eggs, pulses. By contrast, core inflation printed an increase by 4.1% yoy, driven by year-on-year rise in precious metals, transport, and education.”
“Despite a firmer core, Jan-Mar headline inflation not only undershot the RBI’s quarterly projection by a wide margin but also the RBI’s target range. This validates the central bank’s decision to shift to an accommodative stance, besides a rate cut at the April meeting. We maintain our call for further easing in June.”
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The softer-than-expected CPI inflation will provide further comfort to RBI to continue to prioritise growth. We retain our view that RBI will continue on its accommodative stance, with the terminal repo rate likely around 5-5.25%.”
JOE MAHER, ASSISTANT ECONOMIST, CAPITAL ECONOMICS, UK
“While food prices can be extremely volatile, supportive weather conditions should keep a lid on food inflation over the coming months. And with the economy still emerging from its soft patch, underlying price pressures should remain in check too.”
“We think inflation will hover close to the RBI’s 4% target for the remainder of the year, which will give the RBI plenty of scope to cut interest rates to support economic activity. We forecast another 50bp of interest rate cuts this year, bringing the repo rate down to 5.50%, which is a slightly more dovish view than that of the consensus.”
KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE, BENGALURU
“While the potential heat wave could act as a tailwind to inflation, we believe that deflationary impact of Trump’s tariffs will ensure that inflation would remain under control this year, providing enough room to RBI to announce more rate cuts this year than we were earlier anticipating.”
VIVEK KUMAR, ECONOMIST, QUANTECO RESEARCH, MUMBAI
“Going forward, the global disinflationary backdrop in commodity prices should help offset any upside pressure from imported inflation on account of currency weakness.”
“We continue to expect CPI inflation to decelerate from 4.6% in FY25 to 4.1% in FY26.”
(Reporting by Siddhi Nayak in Mumbai, Kashish Tandon, Manvi Pant, Anuran Sadhu and Nandan Mandayam in Bengaluru)
