Newsletter
India’s retail inflation fell to 3.34% in March, a marginal drop from 3.61% in February, marking its lowest level since August 2019.
This keeps it well below the RBI’s comfort zone of 4%, giving the central bank some room to lower interest rates.
CPI measures how much the prices of everyday items like groceries, rent, and fuel have increased over the last year. A drop usually signals slower consumer demand, which cools prices but also suggests people might be cutting back on spending.
This time, the biggest driver was food.
- Vegetable prices plunged, with inflation dropping from 1.07% in February to -7.04% in March.
- Pulses also saw deflation, going from 0.35% to -2.73%.
- On the other hand, core inflation (which excludes food and fuel) remained sticky, inching up to 4.1% from 4%.
- Fuel and light crept back into the positive zone, and housing inflation also rose slightly.
Rural inflation dropped to 3.25%, showing price pressures are easing outside cities. But in a flip, urban inflation inched up to 3.43%.
Zoom out: winter harvest came in strong, especially for vegetables, which pushed prices down significantly in local markets. Meanwhile, as overall consumption slows, retailers and suppliers are cutting prices to push sales, especially for perishables.
With inflation comfortably below the 4% mark, RBI has more space to cut interest rates or keep them low to support growth without worrying about price spikes.
