India's retail inflation cools to 7-month low of 3.6%
What's the story
India's retail inflation fell to a seven-month low of 3.61% in February, government data released on Wednesday showed.
The figure was much lower than the revised 4.26% recorded in January this year.
The decline in inflation can largely be attributed to falling food prices, which make up nearly half of the overall Consumer Price Index (CPI) basket.
Food price impact
Food inflation falls to 3.75% in February
The food inflation rate has dropped to 3.75% in February, down from 5.97% in January.
Official data shows that this is the lowest food inflation rate since May 2023.
Vegetable prices have witnessed a sharp decline, with vegetable inflation contracting to just 1.07% as against a high of 11.35% in January.
Price fluctuations
Cereals and pulses prices show mixed trends
Cereal prices have increased by 6.1% in February 2025, a little lower than January's 6.24% increase.
Meanwhile, pulse prices have decreased by 0.35%, compared to an increase of 2.59% in January.
The rural inflation rate has also decreased to 3.79%, down from January's 4.59%.
Economic outlook
RBI's forecast on inflation for FY26
The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has observed that the decline in inflation is backed by a favorable outlook on food prices.
The committee anticipates further moderation in FY26, which would come as a relief to Indian households.
The RBI has projected an inflation rate of 4.2% for the fiscal year 2025-26 under the leadership of new governor Sanjay Malhotra.
Future predictions
RBI's inflation projection for FY26
The RBI MPC has projected quarterly inflation rates for FY26: Q1- 4.5%; Q2- 4%; Q3- 3.8%; Q4- 4.2%.
Malhotra noted that inflation has come down from a peak of 6.2% in October 2024 to lower levels in November-December, largely due to falling vegetable prices.
The CPI inflation for fiscal year 2024-25 has been projected at 4.8%, with further moderation expected in fiscal year 2025-26, assuming normal monsoon conditions.