A worker has a sack full of refined wheat flour to load it in a supply truck in a wholesale market in Kolkata, India, on April 10, 2025.
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The annual inflation rate of India fell to a 3.34% lower than expected in March, the Ministry of Statistics and implementation of the country’s program reported Tuesday.
The reading fell for the fifth consecutive month and arrived slightly below the 3.61% seen in February, since the growth in food prices continued to soften. The economists surveyed by Reuters were waiting for a 3.6%reading.
Food inflation, which is a key component of the country’s consumer price index, reached 2.69%. The decrease was directed by a drop in the prices of vegetables, spices, eggs and legumes.
The inflation data follow a second consecutive interest rate by the Bank of the India Reserve at its meeting on April 9, which carries its 6% policy rate amid growth concerns in the fifth largest economy in the world.
The RBI estimates the inflation of 4%, at the midpoint of its objective range from 2%to 6%, for the financial year that ends in March 2026, although it pointed out that central inflation in February, which excludes food prices and fuel, increased a maximum of 15 months of 4.1%, mainly driven by an increase in gold prices.
“There has been substantial and broad -based seasonal correction in vegetable prices. Rabi’s uncertainties [winter] The crops have decreased considerably … along with Robust Kharif [autumn] Arrivals, this is expected to prepare the scenario for durable softening in food inflation, “said the Central Bank last week.
More space for rates cuts
Inflation data strengthens the case that the RBI reduces rates, since it seeks to stimulate growth in India, amid the impact of US tariffs.
“The fall in Indian consumer prices in March, which pushes it further below the 4% target of 4% of the Indian Reserve Bank (RBI), reinforces our opinion that the central bank will loosen a monetary policy for a little more than the consensus expects in the coming months,” said Joe Maher, a capital economy economics in London.
The Governor of RBI, Sanjay Malhotra, said in his statement after the policy meeting last week that the Central Bank will change its posture of neutral to accommodation, with the aim of stimulating the economy through softer interest rates.
India’s GDP expanded by 6.2% weaker than expected in the fourth quarter of 2024, and it is estimated that the country’s economy grew by 6.5% in the financial year until March 2025, a strong deceleration of 9.2% the previous year.
The “reciprocal” rates will be directly shaved 0.5 percentage points from the growth of the entire year of India for the financial year that ends in March 2026, according to HSBC. There could be indirect and second order impacts that include more slow export volumes and weaker foreign direct investment flows, added the bank.
India was beaten with a tax of 26% of the “reciprocal” rates of the president of the United States, Donald Trump, before these tasks were suspended for 90 days last week, leaving a 10% reference tariff.
