India’s Retail Inflation Drops to 7-Month Low;Industrial Growth Improves

Ira Singh
Khabar Khabaron Ki,13 Mar’25

India’s retail inflation eased to a seven-month low of 3.61% in February 2025, while industrial production registered a notable expansion by 5% in January, driven by robust manufacturing activity.

Retail Inflation Falls to 3.61%
Retail inflation, as measured by the Consumer Price Index (CPI), declined to 3.61% in February 2025, marking its lowest level since July 2024. This drop from 4.3% in January provides room for the Reserve Bank of India (RBI) to consider a rate cut in its upcoming monetary policy review. The decline in food prices was a key contributor to the easing inflation, with food inflation falling to 3.75%, significantly lower than the 6% recorded in January, noted experts.

According to official release, rural inflation stood at 3.79% in February, while urban inflation was even lower at 3.32%. Vegetable prices saw a notable decline, contributing to the overall dip, although categories such as oils and fats saw a sharp increase of 16.4%, reaching a multi-year high.

ICRA’s Chief Economist, Aditi Nayar, reportedly stated that while the current inflation trend supports expectations of a 25-basis-point rate cut in April, a potential uptick in vegetable prices in March could lead to a marginal increase in inflation, possibly around 3.9-4.0%.

Industrial Growth Strengthens
India’s industrial output expanded by 5% in January 2025, outpacing the revised 3.5% growth recorded in December 2024. The Index of Industrial Production (IIP) showed that the manufacturing sector grew by 5.5%, up from 3.6% in January last year. However, mining activity slowed, with output rising by 4.4% compared to 6% a year ago, while electricity generation registered modest growth of 2.4%, according to information.

On a broader scale, industrial production in the April-January period of FY25 rose by 4.2%, a decline from the 6% growth seen in the same period last year. The capital goods segment, a key indicator of investment activity, showed encouraging signs, posting a 7.8% increase in January, while infrastructure and construction goods output surged by 7%.

Monetary Policy Outlook
With inflation cooling and industrial growth showing resilience, analysts anticipate a more accommodative stance from the RBI. Market expectations are tilting toward a 25-bps repo rate cut in April, with further reductions potentially on the table in June or August, depending on the GDP growth figures for Q4 FY2025.

Financial experts believe that as India navigates the evolving global economic landscape, the combination of stable inflation and a recovering industrial sector is expected to support the country’s broader economic growth trajectory in the coming months.