(Reuters) -India’s retail inflation fell below 4% in February for the first time in six months mainly due to a decline in vegetable prices, giving the central bank room to cut rates further in coming meetings.
Annual retail inflation in February eased to 3.61%, below economists’ estimate of 3.98% and the lowest since July. Inflation for January was revised to 4.26% from 4.31%.
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI
“February CPI came below ours and market expectations led by a sharp fall in food inflation. There is expectation that our estimate of 4.8% for FY25 will likely see a downside.”
“We continue to expect the RBI to cut repo rate by 25 bps in April policy even as it continues to ease the liquidity deficit in the system.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“Inflation decelerated at a faster pace than expected as food corrected sharply in February, on the back of a year-on-year decline in vegetables and pulses, while edible oils alongside cereals held ground.”
“The jump in core inflation to 4% reflected higher gold costs, while the contribution of other segments was little changed. Armed with this low inflation read, the MPC is likely to be comfortable to ease rates in April.”
JOE MAHER, ASSISTANT ECONOMIST, CAPITAL ECONOMICS, LONDON
“The larger-than-expected fall in Indian headline consumer price inflation to below the RBI’s 4% target in February supports our view that the central bank will continue to loosen monetary policy over the coming months.”
“In terms of policy implications, February’s inflation data is further confirmation that the RBI can continue to focus on boosting economic growth. And with inflation looking set to stay close to the RBI’s 4% target for the remainder of the year, we think the central bank will feel comfortable continuing to lower interest rates.”
“We forecast another 75bp of interest rate cuts this cycle, bringing the repo rate down to 5.50%, which is a slightly more dovish view than that of the consensus.”
GAURA SEN GUPTA, INDIA ECONOMIST, IDFC FIRST BANK, MUMBAI
“Core inflation still remains benign indicating negative output gap. We see space for further monetary policy easing by RBI. We expect 25 basis points cut in April and 25 basis points cut in June.”
“We expect further liquidity infusion of 2 trillion rupees in FY26 to insure system liquidity is a mild positive. This is essential for transmission of rate cuts.”
ADITI GUPTA, ECONOMIST, BANK OF BARODA, MUMBAI
“The significant easing in headline inflation can be attributed to lower food inflation, led by deflation in the vegetables category.”
“Core inflation edged up due to higher gold prices. The trajectory of food inflation will need close monitoring amidst evolving climatic risks. For now, the recent CPI reading gives credence to our expectations of a rate cut in April.”
ANITHA RANGAN, ECONOMIST, EQUIRUS, MUMBAI
“After a long draught, CPI headline and CPI food seem to be converging with food inflation at 3.75% With this a disinflation in vegetables is the key driver.”
“Amidst the global cacophony of tariffs, especially the high food tariffs charged by India to protect its sensitive agriculture sector, domestic inflation being in bounds gives some breather that tariff shocks can be navigated to some extent.”
SACHCHIDANAND SHUKLA, GROUP CHIEF ECONOMIST, LARSEN & TOUBRO, MUMBAI
“Hugely lower vegetable and food prices due to the influx of fresh winter produce helped headline inflation. Whereas core was higher owing to marginally higher gold prices, and some pick up in core services.”
DEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS AND RESEARCH, GURUGRAM
“Reciprocal tariff by U.S. has potential to make a dent in Indian economic growth in FY26. February 2025 retail inflation would be a key factor for monetary policy committee meeting of April 2025.”
“We expect RBI to cut policy rates by 25bp and maintain sufficient liquidity in the system.”
MADHAVI ARORA, CHIEF ECONOMIST, EMKAY GLOBAL FINANCIAL SERVICES, MUMBAI
“Despite the shocker on core, the pleasant headline CPI surprise implies that the Q4 FY25 inflation may undershoot RBI’s forecast by more than 40bps, and could keep the rate cut possibility in April solid – as was also reflected in the recent dovish policy minutes.”
“However, we are keeping a tab on the fluid global dynamics and FX knock-on effect as well. So far, subdued global oil prices have tempered the knock-on effect from a weaker INR (Indian rupee). Besides, changing global narrative on growth and tariff noises may allow EM Central banks to be more tolerant to weaker FX, letting them ease their policy stance and rates.”
ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM
“We believe that the sequential uptick in vegetables inflation in March 2025 is likely to prevent a further softening in the food and beverages inflation print in the month, after the substantial cooling seen over the past four months. This would push up the CPI inflation print mildly to about 3.9-4.0% in the next month.”
“The Feb 2025 CPI inflation print falling well below 4% has cemented the expectation of a back-to-back 25 bps rate cut in the April 2025 MPC meeting. This may be followed by another 25 bps repo rate cut either in the June 2025 or the August 2025 meetings, dependant in large part on the next GDP growth print for Q4 FY2025.”
SUJAN HAJRA, CHIEF ECONOMIST & EXECUTIVE DIRECTOR, ANAND RATHI GROUP, MUMBAI
“With inflation trending lower than anticipated, the average CPI for the quarter is now expected to fall below the RBI’s initial projection of 4.4%. Easing food prices, coupled with lower global crude oil prices, have provided a supportive backdrop for inflation to align more closely with the RBI’s 4% target.”
“Against this backdrop, the RBI, which recently cut the repo rate by 25 basis points and implemented liquidity measures to address the system’s deficit, is likely to maintain its easing cycle. The central bank’s stance is influenced by growing concerns over the economic growth outlook, given rising global trade uncertainties and the increasing prevalence of protectionist policies.”
(Reporting by Aleef Jahan, Kashish Tandon, Vivek Kumar M, Meenakshi Maidas, Yagnoseni Das, Ashish Chandra in Bengaluru, Siddhi Nayak in Mumbai; Editing by Maju Samuel)
