In a significant development for the Indian economy, the country's retail inflation has dipped to 3.34% in March 2025. This marks the most substantial decline in nearly six years, highlighting the impact of falling prices for essential items, particularly vegetables and protein-rich foods. Last month, in February, the Consumer Price Index (CPI)-based inflation stood at 3.61%, while it was considerably higher at 4.85% in March of the previous year.

This latest inflation rate not only signifies a welcome reduction for consumers but also indicates the lowest level of retail inflation since August 2019, when it was recorded at 3.28%. Food inflation, which plays a crucial role in influencing the overall CPI, has also seen a decrease, falling to 2.69% in March from 3.75% in February. Comparatively, food inflation was considerably high at 8.52% in March 2024, underscoring the current achievement.

According to the Ministry of Statistics and Programme Implementation (MOSPI), the highest year-on-year inflation rates reported at an all-India level for March 2025 were for coconut oil, which surged by 56.81%, followed by coconut at 42.05%, gold at 34.09%, silver at 31.57%, and grapes at 25.55%. Conversely, there were significant declines in prices for various items, with ginger showing a notable deflation rate of -38.11%, tomatoes at -34.96%, and cauliflower at -25.99%. Other items experiencing reduced inflation included jeera at -25.86% and garlic at -25.22%.

A deeper analysis reveals that the rural sector experienced a considerable fall in both headline and food inflation levels in March 2025. Provisional data indicates that rural headline inflation decreased to 3.25%, down from 3.79% in February. Additionally, the Consumer Food Price Index (CFPI) for food inflation in rural areas plummeted to 2.82% from 4.06% the month prior.

Meanwhile, urban areas saw a slight increase in headline inflation, which rose to 3.43% in March 2025, compared to 3.32% in February. Interestingly, food inflation in urban settings did demonstrate a more favorable trend, declining to 2.48% in March from 3.15% in February, as reported by MOSPI.

This drop in inflation comes on the heels of the Reserve Bank of India (RBI) announcing a reduction in the repo rate by 25 basis points, primarily in response to easing price pressures across various sectors. Looking ahead, the RBI has forecasted an average CPI inflation rate of 4% for the fiscal year 2025-26. The quarterly projections include 3.6% for the first quarter, 3.9% for the second quarter, 3.8% for the third quarter, and 4.4% for the fourth quarter, with risks considered to be evenly balanced.

In parallel to these developments, wholesale price inflation has also shown signs of easing, dropping to a six-month low of 2.05% in March, according to government data released on Tuesday. This decline is attributed mainly to falling prices of essential commodities such as vegetables and potatoes. For reference, the Wholesale Price Index (WPI)-based inflation was recorded at 2.38% in February and a mere 0.26% in March 2024.