Retail inflation slipped to seven-month low of 3.61 per cent in February mainly due to easing prices of vegetables, eggs, and other protein-rich items, creating space for the RBI to go for another cut in interest rate next month.
The consumer price index-based retail inflation was at 4.26 per cent in January and 5.09 per cent in February 2024.
The previous low was witnessed in July.
The consumer price index (CPI) has been in the comfort zone of the Reserve Bank of India (RBI) since November 2024.
"There is a decline of 65 basis points in headline inflation of February 2025 in comparison to January 2025.
"It is the lowest year-on-year inflation after July 2024," the National Statistics Office (NSO) said while releasing the CPI.
Year-on-year food inflation for February was 3.75 per cent.
"A sharp decline of 222 basis points is observed in food inflation in February 2025 in comparison to January 2025.
"The food inflation in February 2025 is the lowest after May 2023," NSO said.
A significant decline in headline inflation and food inflation during February has been mainly attributed to decline in inflation of vegetables, egg, meat and fish, pulses and products, and milk and products.
Key items having lowest year-on-year inflation in February were ginger (-35.81 per cent), jeera (-28.77 per cent), tomato (-28.51 per cent), cauliflower (-21.19 per cent), garlic (-20.32 per cent).
On the other hand, top items with highest inflation were coconut oil (54.48 per cent), coconut (41.61 per cent), gold (35.56 per cent), silver (30.89 per cent), and onion (30.42 per cent).
Data on urban inflation showed a significant decline from 3.87 per cent in January 2025 to 3.32 per cent in February.
A similar decline was observed in food inflation, which decreased from 5.53 per cent to 3.20 per cent in February.
A sharp decline in headline and food inflation in the rural sector was also observed in February to 3.79 per cent from 4.59 per cent a month earlier.
The lowest inflation was in Telangana (1.31 per cent) and highest in Kerala (7.31 per cent).
The RBI, which has been mandated to ensure retail inflation remains at 4 per cent (+/- 2 per cent), has reduced the short-term lending rate (repo) by 25 basis points last month on easing concerns on the inflation front.
The central bank is scheduled to announce the next set of bi-monthly monetary policy on April 9.
ICRA Chief Economist Aditi Nayar said the CPI inflation declined sharper than expected to a seven-month low, appreciably below the mid-point of the RBI's Monetary Policy Committee's medium-term target range, led by a welcome cooling in food inflation.
"However, 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," she said.
Nayar further said the February inflation print falling well below 4 per cent has cemented the expectation of a back-to-back 25 basis points 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, she added.
NSO collects the price data from selected 1,114 urban markets and 1,181 villages covering all states/UTs on a weekly roster.
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