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India’s retail inflation, measured by the Consumer Price Index (CPI), dropped to 3.34 percent in March 2025, marking its lowest level in over five-and-a-half years. This decline was driven by a significant reduction in food prices and the high base effect from the previous year. The subdued inflation aligns with the Reserve Bank of India’s (RBI) expectations and could prompt a potential 50 basis point (bps) cut in the repo rate during the next Monetary Policy Committee (MPC) meeting scheduled for June 4–6, 2025.
Data from the Ministry of Statistics and Programme Implementation (MoSPI) revealed that consumer inflation in March 2025 was lower than February 2025’s 3.61 percent and significantly below 4.38 percent in February 2024. The drop was primarily attributed to a sharp fall in food inflation during the period.
In a statement, MoSPI noted, “Year-on-year inflation rate based on the All-India Consumer Price Index (CPI) for March 2025 is provisionally 3.34 percent. This represents a decline of 27 basis points compared to February 2025 and is the lowest year-on-year inflation since August 2019.”
Madan Sabnavis, Chief Economist at Bank of Baroda, commented, “Following the benign WPI inflation number for March at 2.1 percent, CPI inflation at 3.34 percent is lower than our expectation of 3.6 percent. This decline is primarily due to lower food inflation, which stands at 2.7 percent. Additionally, the high base effect has helped moderate inflation, and this trend is expected to continue for the next 3–4 months.”
Vivek Rathi, National Director (Research) at Knight Frank India, added, “While headline consumer inflation has fallen to a five-and-a-half-year low in March 2025, aided by a seasonal drop in vegetable prices, core inflation remains stubbornly high, exceeding 4 percent. Excluding the food and fuel basket, inflationary pressures persist, impacting household consumption expenditure. Lower-income households, in particular, remain vulnerable to these persistent price increases.”
Subdued food inflation
In March 2025, food inflation sharply declined to 2.69 percent, compared to 3.75 percent in February 2025 and 8.52 percent in March 2024. The Ministry of Statistics and Programme Implementation (MoSPI) reported that the year-on-year inflation rate based on the All-India Consumer Food Price Index (CFPI) for March 2025 stood at 2.69 percent (provisional). This marks the lowest food inflation since November 2021, the MoSPI statement added.
Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA Ltd, commented, “The unexpectedly sharp sequential decline in headline CPI inflation in March 2025 was primarily driven by food items such as meat, eggs, and vegetables. However, a modest rise in inflation was noted in several other groups. With rising temperatures, prices of perishables could increase in the coming weeks. While the initial forecast of an above-normal monsoon is encouraging, the timing and distribution will be crucial for its impact on agricultural output and food inflation.”
The corresponding inflation rates for rural and urban areas stood at 2.82 percent and 2.48 percent, respectively. A significant decline of 106 basis points in food inflation was observed in March 2025 compared to February 2025. Despite the overall drop in food inflation, upward pressure persisted from edible oils and fruits, where inflation stood at 17 percent and 16.2 percent, respectively. The inflation in edible oils is expected to remain elevated due to its dependence on international prices and exchange rate fluctuations.
| India’s retail inflation (Consumer Price Index or CPI) (%) | |||||
| Month | 2020 | 2021 | 2022 | 2023 | 2024 |
| January | 7.50 | 4.06 | 6.01 | 6.52 | 5.10 |
| February | 6.58 | 5.03 | 6.07 | 6.44 | 5.09 |
| March | 5.84 | 5.52 | 6.95 | 5.66 | 3.34 |
| April | 7.22 | 4.23 | 7.79 | 4.70 |
|
| May | 6.27 | 6.30 | 7.04 | 4.31 |
|
| June | 6.23 | 6.24 | 7.01 | 4.81 |
|
| July | 6.73 | 5.59 | 6.71 | 7.44 |
|
| August | 6.69 | 5.30 | 7.00 | 6.83 |
|
| September | 7.27 | 4.35 | 7.41 | 5.02 |
|
| October | 7.61 | 4.48 | 6.77 | 4.87 |
|
| November | 6.93 | 4.91 | 5.88 | 5.55 |
|
| December | 4.59 | 5.59 | 5.72 | 5.69 |
|
Source: Ministry of Statistics and Programme Implementation (MoSPI)
Miscellaneous
Interestingly, inflation for miscellaneous products was high at 5 percent, driven by personal care products, which registered an inflation rate of 13.5 percent. In this sector, cost factors played a significant role, as higher input costs contributed to the rise in prices. Notably, liquefied petroleum gas (LPG) prices increased by nearly 8 percent in April, which could add a marginal 0.1 percent to the inflation rate for April.
Among the states, Kerala recorded the highest inflation rate at 6.6 percent, followed by Chhattisgarh, Maharashtra, Tamil Nadu, Karnataka, Assam, and Haryana, all of which reported inflation above 3.3 percent. In contrast, Delhi and Telangana recorded the lowest inflation rates at 1.5 percent and 1.1 percent, respectively.
Madan Sabnavis, Chief Economist at Bank of Baroda, remarked, “The convergence of inflation in rural and urban India is noteworthy, with food inflation serving as the equalizer. This trend aligns with the RBI's expectations, and if it continues in a similar manner in the financial year (FY) 2025-26, we may anticipate another 50 basis points cut in the repo rate soon.”
Outlook
As household prices remain elevated, it is essential for commercial banks to pass on the benefits of rate cuts to consumers to support domestic consumption and economic growth. This measure is also critical for boosting housing demand, particularly in the affordable segment. Looking ahead, Rathi anticipates that the revival of the Indian rupee and multi-year low crude oil prices will provide some relief from external price pressures. However, disruptions in global supply chains caused by reciprocal trade tariffs could pose upward risks to inflation.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
