New Delhi: Retail inflation in India fell to 3.61 per cent in February, marking a significant decline from 4.26 per cent in January and 5.09 per cent in February 2024, according to the latest data released by the National Statistics Office (NSO). The decrease was primarily driven by a reduction in food prices, particularly in vegetables and protein-rich items, providing room for the Reserve Bank of India (RBI) to consider another interest rate cut next month.
Food Inflation Sees Sharp Decline
The NSO data highlighted a steep 222-basis-point drop in food inflation from January 2025 to February 2025, marking the lowest level since May 2023. The significant decline was attributed to lower inflation in key food categories, including vegetables, eggs, meat and fish, pulses, and dairy products.
Impact on RBI’s Monetary Policy
The RBI, which has a mandate to maintain retail inflation at 4 per cent (+/- 2 per cent ), had already reduced the short-term lending rate (repo rate) by 25 basis points in the previous month due to easing inflationary concerns. With the latest data reflecting continued moderation in price pressures, experts anticipate that the central bank may introduce another rate cut in its upcoming bi-monthly monetary policy review scheduled for April 9.
Outlook for Inflation and Interest Rates
The consistent decline in inflation provides relief to consumers and strengthens the case for a more accommodative monetary policy stance by the RBI. Analysts suggest that further reductions in the repo rate could support economic growth by lowering borrowing costs for businesses and individuals. However, policymakers will remain cautious, keeping a close watch on external factors such as global commodity prices and supply chain disruptions that could impact inflation trends in the coming months.
With inflation now well within the RBI’s comfort zone, the central bank faces a favorable environment to continue supporting economic expansion while ensuring price stability. The upcoming monetary policy review will be closely watched for potential signals on further rate adjustments.
