Retail inflation in February eased to under the Reserve Bank of India’s (RBI) 4% target for the first time in six months, government data released on Wednesday showed. The consumer price index was up only 3.6% from the same month in 2024.
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In January 2025, inflation was almost 4.3%. Policymakers at RBI would be heaving a sigh of relief, as the drop seems to validate their decision to cut interest rates last month in anticipation of a price cool-off. With concerns of economic growth having mounted, RBI’s next decision due in April could confirm a pivot away from inflation control to a growth-supportive monetary policy. We have better-behaved prices of food items to thank for this.
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Meanwhile, the current fiscal year is likely to end with weaker output expansion than in the previous three years and it’s unclear if 2025-26 will mark a turnaround.
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Fiscal policy has attempted to do its bit, with the Union budget unveiling tax cuts to stimulate demand. If inflation stays modest, as expected—RBI sees it averaging 4.2% in 2025-26—we can look forward to cheaper credit. But then, high global uncertainty means we can’t be sure if price stability has durably been attained.
