India's Core Inflation Outlook Remains Positive

Despite the rising prices of industrial metals, India's core inflation outlook stays optimistic, as per a recent report by ICICI Bank Global Markets. The surge in gold prices primarily drove the core inflation higher in February. However, stable global edible oil prices and the anticipation of a normal monsoon forecast a positive outlook for food inflation in the upcoming months.

Uncertainties and Predictions

Uncertainties loom due to global market factors such as trade tariffs and volatile fertilizer costs that may influence food prices. On the domestic front, the demand-supply outlook appears balanced, with a high base effect helping to keep food inflation moderate over the next year. Inflation is predicted to average 4.2 per cent year-on-year in FY26, aligning with the apex bank’s target.

Retail Inflation Drops to a Seven-Month Low

India’s retail inflation fell to a seven-month low of 3.61 per cent YoY in February 2025, down from 4.26 per cent in January, primarily due to a sharp decline in food inflation. A stable monsoon, steady currency exchange rates, and lower energy prices are expected to keep inflation in check over the coming months.

Impact of Global Trends on Domestic Prices

While the expected rise in rabi crop output, particularly wheat and cereals, should help stabilize food prices, edible oils and sugar prices may face upward pressure due to global market trends and a dip in sugarcane production. Despite the rise in industrial metal prices, a stable Indian rupee and weak global energy demand are likely to contain core inflation.

Monetary Policy Committee's Potential Interest Rate Cut

With inflation below the RBI’s Q4 FY25 projection of 4.4 per cent, analysts believe the Monetary Policy Committee could opt for an interest rate cut in April. The latest data now pegs Q4 FY25 inflation at 3.9 per cent, providing the central bank with room to ease its policy stance.