New Delhi [India], March 14 : Consumer price index (CPI) or retail inflation is likely to undershoot the Reserve Bank's target in the January-March 2025 quarter, opening more policy space for easing the policy rate, Bank of Baroda said.
India's retail inflation significantly improved in February 2025, as the year-on-year Consumer Price Index (CPI) inflation rate stood at 3.61 percent, a decline of 65 basis points from the previous month.
The retail inflation print fell below 4 per cent in February for the first time in six months, mainly due to a decline in vegetable prices.
"We do not see major risks lurking for food inflation. However, one needs to be vigilant on account of hotter than expected summer, stickier international edible oil prices and risks from global inflationary policies," said Dipanwita Mazumdar, an economist at Bank of Baroda.
As of now, the tide is in favour of a lower headline print emanating from a better Rabi harvest, better supply management strategies of the government, rangebound commodity prices, benign energy price outlook and lesser dependence of the CPI basket in terms of imported commodities.
"Overall, we expect CPI to settle at 4.6 per cent in 2024-25, with our Q4 number at 3.8 per cent," added the economist.
Headline CPI got the necessary comfort from food inflation at a crucial juncture when uncertainty on global inflation predominated.
The sharp decline in inflation in February, particularly in food categories, was largely attributed to falling prices in key items like vegetables, eggs, meat and fish, pulses, and milk products. These price corrections have provided much-needed relief to households grappling with the high cost of living in recent months.
Food prices remained a problem for Indian policymakers, who wish to sustainably bring retail inflation to 4 per cent.
But the latest inflation data once affirms that inflation is under control. Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well.
The RBI had kept the repo rate elevated to keep inflation contained. The repo rate is the rate of interest at which the RBI lends to other banks.
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