NEW DELHI: The retail inflation dropped to a seven-month low of 3.61 per cent in February, down by 65 basis points from January, driven primarily by a slowdown in the price rise of vegetables and protein-rich items. This decline has created room for the Reserve Bank of India (RBI) to potentially implement a second interest rate cut next month, the government announced on Wednesday.
This marks the lowest inflation level since July 2024, offering some relief to consumers amid a challenging economic environment. Compared to 5.09 per cent in February last year, the consumer price index (CPI)-based retail inflation for February this year stood at 3.75 per cent, according to data released by the National Statistics Office (NSO). The figures indicate a significant easing of price pressures, particularly in the food sector.
Food inflation saw a sharp decline of 222 basis points in February compared to January 2025, with the All India Consumer Food Price Index (CFPI) recording a year-on-year inflation rate of 3.75 per cent. The NSO noted that this is the lowest food inflation rate since May 2023. The drop in headline and food inflation was largely attributed to lower prices of vegetables, eggs, meat, fish, pulses and milk products.
The inflationary trends varied between rural and urban areas. In rural regions, CPI inflation fell from 4.59 per cent in January to 3.79 per cent in February, while food inflation dropped from 6.31 per cent to 4.06 per cent. In urban areas, headline inflation decreased from 3.87 per cent to 3.32 per cent, with food inflation experiencing a steeper decline from 5.53 per cent to 3.2 per cent. These reductions contributed to the overall slowdown in inflation.
However, sector-specific inflation trends presented a mixed picture. Housing inflation edged up slightly to 2.91 per cent in February from 2.82 per cent in January, while fuel and light inflation remained negative at -1.33 per cent, though it improved from -1.49 per cent in January. Education inflation remained stable at 3.83 per cent, while health inflation rose marginally to 4.12 per cent from 3.97 per cent. Transport and communication inflation saw a modest increase to 2.87 per cent from 2.76 per cent. These price adjustments have provided some relief to households struggling with the high cost of living in recent months.
In February, the RBI, which aims to keep retail inflation at 4 per cent (+/- 2 per cent), reduced the short-term lending rate (repo) by 25 basis points, reflecting easing concerns over inflation. The central bank is set to announce its next bi-monthly monetary policy on April 9.