Retail inflation softened to 3.61% in February 2025, marking a sharp decline from 4.26% recorded in January, according to the latest data released by the National Statistics Office (NSO). This is the lowest year-on-year inflation rate since July 2024.
The Consumer Food Price Index (CFPI), which measures changes in retail prices of food items, saw an even steeper drop. Food inflation fell to 3.75% in February, compared to 5.97% in January. The decline is attributed to a significant easing in the prices of vegetables, eggs, meat and fish, pulses, and dairy products.
Rural inflation fell significantly to 3.79% in February from 4.59% in January. Food inflation in rural regions also softened to 4.06% from 6.31% in the previous month.
Urban areas reported a similar trend, with headline inflation decreasing to 3.32% from 3.87%. Food inflation in cities declined sharply to 3.20%, down from 5.53% in January.
Housing inflation rose slightly to 2.91% in February from 2.82% in January, applicable only to urban areas.
Fuel and light inflation continued its downward trend, remaining in negative territory at -1.33%, though it improved slightly from -1.49% the month before. Education inflation held steady at 3.83%.
Health inflation rose to 4.12% from 3.97%.
Transport and communication inflation also saw a minor uptick, registering at 2.87% compared to 2.76% in January.
"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, dependent in large part on the next GDP growth print for Q4 FY2025. Nevertheless, we are apprehensive that tight liquidity conditions may delay transmission of policy rate cuts to bank deposit and lending rates," said Aditi Nayar, chief economist, ICRA.
Kerala topped the list of major states with the highest year-on-year inflation rate at 7.31%, followed by Chhattisgarh (4.89%), Karnataka (4.49%), Bihar (4.47%), and Jammu & Kashmir (4.28%).