A Reuters poll of 40 economists conducted from April 3 to 8 had estimated March inflation to be around 3.60%, indicating little to no change from the previous month.
Headline inflation not only remained comfortably within the Reserve Bank of India’s tolerance band of 2–6% but also stayed below the ideal 4% inflation target.
Food inflation, which accounts for nearly half of the Consumer Price Index (CPI) basket, slowed to 2.69% in March, compared with 3.75% in February.
In terms of kitchen staples, vegetable inflation fell 7.04% in March, as compared to February’s contraction of 1.07%. For cereals and pulses, which form a significant portion of India’s daily diet, inflation came in at 5.93% for the former while the latter contracted 2.73%, respectively.
Meanwhile, the inflation rate for fuel & light during the month was recorded at 1.48%.Rural inflation cooled to 3.25% in March from 3.79% in February, while urban inflation contracted to 2.48% compared to 3.32% a month earlier.
RBI outlook: Relief ahead?
RBI Governor Sanjay Malhotra, while announcing the Monetary Policy Committee’s decision this Wednesday, said that inflation has been on a downward trend, supported by a favourable outlook on food prices.
He noted that inflation is expected to ease further in FY26, potentially offering relief to households grappling with cost pressures. However, the central bank cautioned that it remains alert of global uncertainties.
US President Donald Trump slapped multiple countries with higher tariffs while executing his “reciprocal” tariffs plan on April 2. India was hit with a 26% import duty on all its goods. Though the President has since then paused higher rates for 90 days effective April 9 on all countries but China, the 10% base rate remains as well as the separate 25% auto tariffs.
“On the inflation front, while a sharper than expected decline in food prices has given us comfort, we remain vigilant to possible risks from global uncertainty and weather disruptions,” Malhotra added.
Despite global uncertainties—including those triggered by US tariff hikes—the MPC retained its inflation forecast for the fiscal year 2025-26 at 4%, a slight reduction from the 4.2% projected in the February meeting.
For FY26, the RBI expects inflation to be 3.6% in the first quarter, 3.9% in the second, 3.8% in the third, and 4.4% in the final quarter, with risks deemed evenly balanced.
