A laborer carries a sack filled with refined wheat flour to load it onto a supply truck at a wholesale market in Kolkata, India, on April 10, 2025.
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India’s annual inflation rate fell to a lower-than-expected 3.34% in March, the country’s Ministry of Statistics and Programme Implementation reported Tuesday.
The reading fell for a fifth straight month and came in slightly below the 3.61% seen in February, as growth in food prices continued to soften. Economists polled by Reuters had expected a reading of 3.6%.
Food inflation, which is a key constituent of the country’s consumer price index, hit 2.69%. The decline was led by a fall in prices for vegetables, spices, eggs and pulses.
The inflation data follows a second straight interest rate cut by the Reserve Bank of India at its meeting on April 9, bringing its policy rate to 6% amid growth concerns in the world’s fifth largest economy.
The RBI estimates inflation at 4% — at the midpoint of its target range of 2% to 6% — for financial year ending March 2026, although it noted that core inflation in February — which excludes food and fuel prices — spiked to a 15-month high of 4.1%, driven mostly by an uptick in gold prices.
“There has been a substantial and broad-based seasonal correction in vegetable prices. The uncertainties on rabi [winter] crops have abated considerably … Along with robust kharif [autumn] arrivals, this is expected to set the stage for a durable softening in food inflation,” the central bank said last week.
More room for rate cuts
The inflation data strengthens the case for the RBI to cut rates as it seeks to stimulate growth in India, amid the impact of U.S. tariffs.
“The larger-than-expected fall in Indian consumer price inflation in March, which pushes it further below the Reserve Bank of India’s (RBI’s) 4% target, reinforces our view that the central bank will loosen monetary policy by a bit more than the consensus expects over the coming months,” said Joe Maher, an economist at Capital Economics in London.
RBI Governor Sanjay Malhotra said in his statement after last week’s policy meeting that the central bank will shift its stance from neutral to accommodative, aiming to stimulate the economy through softer interest rates.
India’s GDP expanded by a weaker-than-expected 6.2% in the fourth quarter of 2024, and the country’s economy is estimated to have grown 6.5% in the financial year to March 2025 — a sharp slowdown from 9.2% the year before.
“Reciprocal” tariffs will directly shave off 0.5 percentage point from India’s full-year growth for the financial year ending March 2026, according to HSBC. There could be indirect and second-order impacts from factors including slower export volumes and weaker foreign direct investment flows, the bank added.
India was hit with a 26% levy from U.S. President Donald Trump’s “reciprocal” tariffs, before those duties were suspended for 90 days last week, leaving a 10% baseline tariff.
