Retail Inflation Cools Down Significantly

In a surprising turn of events, retail inflation in India cooled down to a seven-month low in February, primarily due to a decrease in food prices. This development provides the Reserve Bank of India (RBI) with the much-needed headroom to consider lowering interest rates in April.

The data, released by the National Statistical Office (NSO), showed that the consumer price index (CPI) rose by an annual 3.6% in February, marking a significant slowdown from the 4.3% recorded in January and the 5.1% from February of the previous year.

Food Prices Lead the Decline

The food price index also saw a notable slowdown, dropping to 3.8% in February from nearly 6% in January. This decline was observed across both rural and urban areas, with rural inflation cooling to 3.8% and urban inflation slowing to 3.3%.

Experts are now anticipating further rate cuts by the central bank to stimulate growth, given the easing price pressures. "The Feb CPI inflation print falling well below 4% has cemented the expectation of a back-to-back 25 basis points rate cut in the April 2025 MPC meeting," said Aditi Nayar, chief economist at ratings agency Icra.

Industrial Output Growth Improves

In related news, the index of industrial production (IIP) rose by 5% in January, outpacing the upwardly revised 3.5% growth in December. The manufacturing sector, in particular, showed strong growth, expanding by 5.5% in January compared to the same month last year.