Retail Inflation Drops to 67-Month Low of 3.34% in March

Inflation cooled to a 67-month low of 3.34% in March against 3.61% in the previous month on the back of declining food inflation.

“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.

Retail inflation remained below RBI’s tolerance limit of 4% for the second consecutive month in March. This comes after the Reserve Bank of India reduced the repo rate by 25 bps. The Indian economy ended at 4.6% in FY25, compared to 5.4% in FY24.

In the coming year, RBI expects inflation to dip further to 4%. In its latest meeting, RBI revised the inflation forecast from 4.2% to 4%.

“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.

Food inflation

Food inflation fell to a 40-month low of 2.69% March, compared to 3.75% in February. Vegetable deflation widened to 7.04% against 1.13% in the previous month, while deflated at 3.16%.

On the other hand, Fruit inflation surged to double digits for the third consecutive quarter, while oil inflation remained above 10% for the third month.

Core inflation

Core inflation inched up to 4.1% in March on the back of surging inflation in housing and miscellaneous items. Miscellaneous inflation surged by 4.99% as education, transportation and health prices elevated.