The Reserve Bank of India’s Monetary Policy Committee (MPC) decided to lower the policy interest rate by 25 basis points to 6% after. Experts expect an additional tax cut this year, which could reduce the repurchase rate to 5.50%.
“The high base effect helps regulate the amount of inflation, and this comfort will be there for the next 3-4 months,” said Madan Sabnavis, chief economist at Varodata Bank.
In the fiscal year, inflation fell from 5.4% in FY24 to 4.6% in FY24.
Last week, the central bank revised its inflation forecast to fiscal 26 from an earlier 4.2%.
“The continued seasonal correction of food prices has led to moderate inflation in March. However, the decline in the same trend is not uniform due to the rise in fuel and light and core inflation.”
In March, fuel and light inflation was 1.5%.
Although rural inflation fell to 3.3% in March from 3.8% in February, inflation rose to 3.4% in urban areas from 3.3% in the same period.
Among the 36 states and union territories, Kerala has the highest inflation rate of 6.6%, followed by Karnataka (4.4%), Chhattisgarh (4.3%), Jamu & Kashmir (4%) and Maharashtra (3.9%).
“There are signs that demand is reflected in rising core inflation,” Jasrai noted.
In March, core inflation rose to a 16-month height of 4.1%.
“This is driven by the increase in precious metals, transportation and education,” said Radhika Rao, executive director and senior economist at DBS Bank.
Food, service
Food inflation fell to 2.7% in March for more than three years. Overall, of 7.5% in FY24, 7.3% in FY25 reduced it to 7.3%.
“Food inflation fell in March due to corrections in vegetable and bean prices,” Jasrai said.
Vegetable inflation rose 7% year-on-year in March, while pulse prices fell 2.7%.
“While the initial forecast for higher than normal monsoons is encouraging, timing and distribution will be key to the ongoing impact on agricultural output and food inflation,” said Aditi Nayar, chief economist at ICRA.
The highest oil and fat in foods is 17.1%. Next is 16.3% of the fruit.
“Edible oil will continue to put pressure because it depends on international prices and exchange rates,” Sabnavis said.
