The moderation in headline retail inflation to 3.3% for March 2025 comes as a surprise, especially against the Reserve Bank of India’s year-end forecast of 4.8%. Coming after two consecutive rate cuts totalling 50 basis points since February, this reading appears to reinforce the central bank’s recent shift toward an accommodative stance. However, the decline in inflation is largely seasonal, driven primarily by base effects and a sharp fall in vegetable prices. The underlying momentum in core categories tells a more disquieting story.Core inflation has hardened to 4.1%, rising 100 basis points over the past 10 months. This marks a reversal from the previous trend of elevated food inflation offset by easing core pressures. In contrast, the current configuration is one of falling food and rising core prices.
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