India experienced retail inflation to 3.61% in February, compared to 4.31% in January on an annual basis, according to government data published on Wednesday.
The drop in the consumer price index (IPC) in February was mainly awarded to the drop in food prices. Food inflation, which represents almost half of the IPC basket, fell to 3.75% against 5.97% in January. This marks the lowest food inflation rate since May 2023, according to official data.
In February 2025, vegetable inflation fell to 1.07% in annual sliding, significantly lower than the 11.35% growth observed in January. Cereal prices increased by 6.10%, slightly down compared to growth of 6.24% in January, while pulses experienced a decrease of 0.35%, contrasting with an increase of 2.59% in the previous month.
Rural inflation decreased to 3.79%, compared to 4.59% in January, and urban inflation dropped to 3.32% against 3.87% the previous month.
“There is a drop of 65 basic points in the inflation of February 2025 compared to January 2025. This is the lowest inflation in annual shift after July 2024,” noted the government.
A significant decrease in the inflation of major securities in the urban sector was observed, with a drop of 3.87% in January 2025 to 3.32% (provisional) in February 2025. This trend also reflected in food inflation, which increased from 5.53% in January 2025 to 3.20% in February 2025.
In terms of housing inflation, the rate of year in February 2025 was 2.91%, slightly higher than the corresponding rate of 2.82% in January 2025. It is important to note that the housing index is compiled exclusively for the urban sector.
RBI inflation prospects
The monetary policy committee of the Reserve Bank of India, in February, noted that inflation had decreased due to a positive perspective of food prices and should continue to decrease during financial year 26, relieving Indian households. RBI’s objective is to maintain inflation in a target range of 2 to 6%.
The central bank predicted that inflation was 4.2% for the year 2025-26. The RBI Monetary Policy Committee (MPC) provides that inflation is 4.5% in the first quarter, 4% in the second quarter, 3.8% in the third quarter and 4.2% in the fourth quarter of financial year 26, with risks uniformly distributed.
The newly appointed RBI governor, Sanjay Malhotra, stressed that inflation went from his peak of 6.2% in October 2024 at lower levels in November-December. This drop can be awarded to the drop in vegetable prices. The projected inflation of the IPC for 2024-25 is 4.8%, with expectations for additional moderation in 2025-2026, assuming a normal monsoon season.
