Context :
- Retail inflation (CPI) fell to 3.34% in March 2025, the lowest since late 2019.
- The drop was driven by falling food prices, particularly vegetables, pulses, and eggs.
- Rural inflation fell to 3.25%, while urban inflation rose slightly to 3.43%.
- Consumer Food Price Inflation declined sharply to 2.7%, from 3.75% in February.
- Fuel and light inflation rose marginally to 1.48%, marking the first price rise since Sep 2023.
- State-wise variation:
- Highest inflation: Kerala (6.6%)
- Lowest inflation: Delhi (1.5%), Telangana (1.1%)
Relevance : GS 3(Indian Economy)

Policy and Monetary Context
- The decline follows two recent RBI repo rate cuts (each by 25 bps).
- Indicates monetary policy easing is yielding results, without triggering inflation.
- Analysts expect inflation to stay below 4%, creating space for a further 50 bps repo rate cut.
Implications
- Boosts household purchasing power, especially in rural areas.
- Signals macroeconomic stability and room for growth-focused policy.
- Could stimulate consumption and investment, given lower interest rates.
- Positive sentiment for bond and equity markets due to lower inflation expectations.
Implication:
Inflation Management
- Reflects effectiveness of inflation-targeting framework (RBI’s 4±2% band).
- Emphasizes food price volatility’s role in retail inflation—a persistent issue in India.
Monetary Policy & Growth Trade-off
- Shows a pro-growth bias of RBI amid global disinflationary trends.
- Highlights the delicate balance between stimulating demand and maintaining price stability.
Sectoral Impact
- Agriculture: Lower food inflation might hurt farmer incomes despite consumer benefit.
- Manufacturing & MSMEs: May benefit from rate cuts, improving credit access.
- State-level divergence: Calls for granular inflation management, considering regional disparities.
Broader Macroeconomic Linkage
- May aid in current account control if rate cuts improve competitiveness.
- Needs alignment with fiscal policy and supply-side measures for sustainable inflation control.