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India’s retail inflation dipped to a seven month low of 3.6% as food prices eased in February 2025, led by vegetables, pulses, and eggs. The annual change in consumer prices was 4.26% in January 2025.

The increase in the Consumer Price Index (CPI), which measures the retail prices, has slowed for the fourth consecutive month and is now lower than the Reserve Bank of India’s (RBI) target inflation of 4%, increasing the likelihood of another 0.25% rate cut by the central bank next month.

“There is a decline of 65 basis points in headline inflation of February 2025 in comparison to January 2025. It is the lowest year-on-year inflation after July 2024,” the National Statistics Office (NSO) said, while releasing the CPI.

Cheaper vegetables, pulses

The NSO data showed that the Consumer Food Price Index (CFPI) increased just 3.75% in February, the slowest in almost two years. CFPI stood at 5.9% in the previous month. Vegetable prices deflated 1%, after seeing double digit inflation in most months of the current financial year. Among vegetables, tomato prices deflated, and potato inflation slowed, while onion prices rose at a quicker rate.

Wheat prices rose 8.8% in the reporting month, slightly more than the 7.8% seen in January 2024. Pulses and products inflation entered negative territory for the first time in the current fiscal, deflating 1.35% in February. 

The easing of food inflation comes on a higher base as, for the better part of 2024-25, food prices increased at a pace of more than 5%.

Rural, urban consumers benefit

Price rise for urban consumers slowed to 3.3%, compared to 3.9% in the previous month. Rural consumers saw inflation dip to 3.8%, from 4.6% in the previous month.

Retail inflation was the highest in Kerala at about 7.3% and the lowest in Telangana, where consumer prices increased just 1.3%. Nine of the 22 States had inflation above 4%. Varying food prices are the reason for this differential, according to Madan Sabnavis, Chief Economist at the Bank of Baroda. 

Rate cut likely

A retail inflation within the RBI’s comfort range has increased the probability of another 25 basis point cut in the repo rate by the bank’s April Monetary Policy Committee (MPC) meeting, say economists. A basis point is one-hundredth of a percentage.

“The inflation trajectory is turning more benign than earlier expectations thereby creating further room for sharper monetary easing. We expect a 25 bp rate cut each in April and June policy along with a shift in the stance to accommodative. Beyond June, we continue to monitor the downside risks to growth to decipher room for additional rate easing,” said Upasna Bhardwaj, the Chief Economist of Kotak Mahindra Bank, in a statement.