India’s retail inflation hits near six-year low at 3.34 percent in march, driven by cheaper food prices

By: Team India Tracker

The drop in inflation was particularly evident in food prices, a critical component of the Consumer Price Index (CPI).

India’s retail inflation cooled to 3.34 Percent in March, marking its lowest level since August 2019, according to data released by the Ministry of Statistics and Programme Implementation (MOSPI). The moderation, largely attributed to a decline in the prices of vegetables and protein-rich food items, follows a CPI-based inflation rate of 3.61 Percent in February and a significantly higher 4.85 Percent recorded in March last year.

The urban inflation in March 2025 increased to 3.43 percent from 3.32 percent in February 2025. Talking about the inflation in rural areas, it decreased from 3.79 percent in February to 3.25 percent in March 2025. Consumer price index is used in calculating the retail inflation in the economy by tracking the changes in prices of most commonly used goods and services. This means that higher the CPI, higher the inflation which occurs due to the rise in prices of goods and services.

The drop in inflation was particularly evident in food prices, a critical component of the Consumer Price Index (CPI). Food inflation eased to 2.69 Percent in March, down from 3.75 Percent in February and a staggering 8.52 Percent in the same month last year.

Radhika Rao, executive director and senior economist at DBS Bank said, “The downside surprise in headline inflation reflected a deeper correction in food costs, led by a sequential decline in vegetables, eggs, and pulses. By contrast, core inflation rose by 4.1 percent on-year, driven by increases 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 fell below the RBI’s target range.” 

Paras Jasrai, associate director at India Ratings and Research said, “The prices of vegetables were down 7.0 percent on-year, the sharpest pace of decline since May 2023, thereby pulling the food inflation down to a 40-month low. In addition, prices of pulses were down 2.7 percent on-year in the same period, the fastest fall in prices in over six years (February 2019: 3.8 percent). Even the cereals inflation was down to a 33-month low of 5.9% due to better kharif output. The easing of food inflation is expected to bring relief to households and support consumption demand as the new fiscal year begins.” 

Source: Ministry of Statistics and Programme Implementation

Among the items registering the sharpest year-on-year price increases at the national level were coconut oil (56.81 Percent), coconut (42.05 Percent), gold (34.09 Percent), silver (31.57 Percent), and grapes (25.55 Percent). Conversely, substantial deflation was observed in products like ginger (-38.11 Percent), tomato (-34.96 Percent), cauliflower (-25.99 Percent), jeera (-25.86 Percent), and garlic (-25.22 Percent).

Rural India saw a more pronounced easing of inflationary pressure. Provisional estimates show rural headline inflation dropped to 3.25 Percent in March, down from 3.79 Percent in February, highlighting a broader trend of declining price pressures across both urban and rural markets.

The recent decline in inflation follows the Reserve Bank of India’s (RBI) decision to lower the repo rate by 25 basis points, a move aimed at addressing softening price pressures across the economy. The central bank has forecasted average Consumer Price Index (CPI) inflation at 4 Percent for the fiscal year 2025–26, with quarterly estimates set at 3.6 Percent in Q1, 3.9 Percent in Q2, 3.8 Percent in Q3, and 4.4 Percent in Q4. The RBI noted that the risks to this inflation outlook remain evenly balanced.

Last week, the Reserve Bank of India's Monetary Policy Committee revised down the country's GDP growth projection for the fiscal year 2025–26 to 6.5 Percent, a slight reduction from its earlier estimate of 6.7 Percent. Following the policy announcement, RBI Governor Sanjay Malhotra attributed the 25 basis point cut to rising global trade and policy uncertainties. He highlighted concerns over the potential economic impact of unexpectedly sharp tariff measures reminiscent of the Donald Trump administration, which could weigh on Asia’s third-largest economy.

Meanwhile, wholesale inflation also showed signs of easing. Data released by the government on Tuesday revealed that the Wholesale Price Index (WPI)-based inflation dipped to 2.05 Percent in March, the lowest in six months. This moderation was primarily driven by declining prices of vegetables, potatoes, and other essential food commodities.

In comparison, wholesale inflation stood at 2.38 Percent in February and a mere 0.26 Percent in March 2024, highlighting a significant year-on-year increase but also underscoring the recent downward trend in price growth. 

Notably, 12 out of 22 states recorded inflation rates below the national average of 3.34 Percent in March. These included Andhra Pradesh, Bihar, Delhi, Gujarat, Himachal Pradesh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Telangana, Uttar Pradesh, and West Bengal.