India’s retail inflation drops to 3.61% in February, eases below 4% for first time in six months

NEW DELHI: India’s retail inflation saw a sharp decline in February 2025, with the year-on-year consumer price index (CPI) inflation rate dropping to 3.61 per cent. This marks a significant 65-basis-point fall from the previous month and brought inflation below the 4 per cent mark for the first time in six months, majorly driven by lower vegetable prices.

A report by the Bank of Baroda predicted that inflation will stay below RBI’s target in the January-March 2025 quarter, creating more room for a potential policy rate cut.

Economist Dipanwita Mazumdar from Bank of Baroda said that though food inflation risks appear minimal for now, factors like an unexpectedly hot summer, stubborn global edible oil prices, and international inflationary pressures warrant close monitoring.

At present, the tide favors a lower headline print following a better Rabi harvest, better supply management strategies of the government, range bound commodity prices, benign energy price outlook and lesser dependence of the CPI basket in terms of imported commodities.

"Overall, we expect CPI to settle at 4.6 per cent in 2024-25, with our Q4 number at 3.8 per cent," the economist said.

Headline inflation received the much needed comfort from food inflation despite uncertainty on global inflation predominated.

The recent inflation drop provided necessary relief to Indian households, especially with falling prices in key food categories such as vegetables, eggs, meat, fish, pulses, and dairy products. Food inflation has been a continuous challenge for policymakers aiming to keep retail inflation sustainably close to 4 per cent.

Despite global inflation concerns, India has largely managed to maintain control over its price levels.

The RBI has kept the repo rate and its key lending rate at elevated levels to ensure inflation remains in check. With inflation now easing, the central bank may have more flexibility to adjust its monetary policy in the coming months.

Stay informed with the latest business news, updates on bank holidays and public holidays.