Retail inflation in March hits its lowest level in over five years

India’s retail inflation dropped to 3.34% in March, the lowest since August 2019, driven by falling food prices. During the month pf March, food inflation eased to 2.69% from 3.75% in the previous month, reaching its lowest level since November 2021.

India’s retail inflation dropped to a more than five-year low in March, driven by a continued decline in food prices. This easing of price pressures could provide the Reserve Bank of India (RBI) with more space for future interest rate cuts, especially as global economic concerns mount amid the ongoing U.S.-China trade tensions.

According to government data, annual retail inflation fell to 3.34% in March, below economists’ expectations of 3.60%, and down from 3.61% in February. This marks the lowest inflation reading since August 2019. The decline has been primarily led by falling food prices, which had remained elevated for much of last year.

Food inflation dropped to 2.69% in March from 3.75% in February — the lowest since November 2021. Vegetable prices saw a sharp decline of 7.04% year-on-year, reversing a 1.07% increase the previous month. Cereal prices rose 5.93%, slightly less than the 6.1% rise in February, while pulse prices fell 2.73%, compared to a 0.35% decline previously.

The Reserve Bank of India (RBI), cut its key policy rate for a second consecutive time, last week, and shifted to a more accommodative stance, indicating more rate reductions ahead to stimulate domestic demand. It also revised the GDP growth forecast for the current fiscal year down to 6.5% from 6.7%. However, the central bank warned of potential risks to inflation from global economic uncertainty and possible weather-related supply disruptions. It maintained a forecast of 4% inflation for the fiscal year, assuming a normal monsoon. (The RBI’s next policy meeting is scheduled for June.)

India is expecting above-average monsoon rainfall in 2025, which could support better agricultural output and boost economic growth. Meanwhile, core inflation, which excludes food and fuel, rose slightly to 4.1% in March, indicating steady underlying demand in the economy.