India's retail inflation eases to seven-month low of 3.61% in February

India’s retail inflation eased to a seven-month low of 3.61% in February 2025, down from 4.31% in January, as food price pressures softened, according to government data released on Wednesday. This brings inflation below the Reserve Bank of India’s (RBI) medium-term target of 4% for the first time since August 2024. The Consumer Price Index (CPI) based inflation remained within the RBI’s 2-6% tolerance band. A Reuters poll of 45 economists had projected February’s inflation at 3.98%, but the actual figure was lower. Rural food inflation stood at 4.06%, while urban food inflation was 3.20%. Rural inflation dropped to 3.79% from 4.59% in January, while urban inflation declined to 3.32% from 3.87%. The easing inflation could reduce consumer cost pressures, providing relief to households ahead of the summer season, when food prices fluctuate.   

Alongside moderating inflation, India’s industrial output, measured by the Index of Industrial Production (IIP), grew by 5% YoY in January 2025, up from 3.2% in December 2024, driven by the manufacturing and mining sectors. Mining output rose by 4.4%, the manufacturing sector expanded by 5.5%, and electricity generation increased by 2.4%. The RBI had projected CPI inflation for FY25 at 4.8%, with the Q4 FY25 estimated at 4.4%. With inflation falling below 4%, analysts suggest the central bank may consider further monetary easing. The RBI recently cut the repo rate by 25 basis points to 6.25% to support growth. Its next policy meeting in April 2025 will be closely monitored for further rate cuts. However, decisions will depend on global crude prices, geopolitical risks, and core inflation trends. 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.