India’s wholesale inflation eased to a six-month low of 2.05 per cent in March, offering some relief from price pressures. The drop comes as a result of slower increases in food and fuel prices, along with a stabilisation in the costs of manufactured goods.
However, warnings of a potential heatwave across the country have sparked concerns about fresh inflationary challenges in the coming months.
The latest data, released on Tuesday, showed that wholesale inflation — a measure of price changes at the producer level — fell from 2.38 per cent in January. The figure also came in below economists’ expectations, who had forecast it to be around 2.5 per cent, according to a Reuters poll.
According to the government, the positive rate of inflation for March 2025 was primarily driven by increased prices in categories such as food manufacturing, electricity, textiles, and other manufactured goods.
A closer look reveals that wholesale food inflation slowed to 4.66 per cent in March, down from 5.94 per cent in February. Similarly, inflation in primary articles came down to 0.76 per cent from 2.81 per cent in the previous month.
The fuel and power segment also showed improvement, recording a marginal rise of 0.20 per cent compared to a contraction of 0.71 per cent in February.
Manufactured products, which account for nearly two-thirds of the wholesale price index, saw inflation rise to 3.07 per cent from 2.86 per cent. While this category continues to show steady growth, it has not accelerated sharply enough to offset the overall cooling trend.
Economists, however, warn that the relief might be short-lived. The India Meteorological Department has issued warnings of intense heatwaves, which could push up food prices, particularly those of fruits and vegetables.
Rising temperatures are likely to disrupt agricultural output and lead to seasonal spikes in essential kitchen staples.
Rahul Bajoria, Chief Economist for India and ASEAN at BofA Global Research, noted that “as weather turns less supportive, and temperatures rise during summer months, vegetable and fruit prices are expected to start climbing seasonally.”
Retail inflation, which impacts consumers more directly, also fell to a seven-month low of 3.61 per cent in February, down from 4.31 per cent in January. The retail inflation data for March is expected to be released later this evening, and analysts are watching closely for any signs of reversal in the downward trend.
Among key food items, vegetable prices dropped significantly, falling by 15.88 per cent in March compared to a 5.80 per cent drop the month before. Onion inflation saw a steep decline to 26.65 per cent from 48.05 per cent, while potatoes recorded a deflation of 6.77 per cent.
Pulses, too, remained cheaper, with a deflation of 2.98 per cent compared to 1.04 per cent in February. Cereal prices rose by 5.49 per cent, slightly down from 6.77 per cent in the previous month.
The Reserve Bank of India’s Monetary Policy Committee (MPC), during its latest meeting earlier this month, stated that the inflation trend is on a downward path, supported by an improved food outlook. The central bank has projected overall inflation at 4 per cent for the financial year 2025–26.
In quarterly terms, the RBI expects inflation to stand at 3.6 per cent in Q1, 3.9 per cent in Q2, 3.8 per cent in Q3, and 4.4 per cent in Q4. RBI Governor Sanjay Malhotra said there is now "greater confidence of durable alignment of headline inflation with the target of 4 per cent over the 12-month horizon.”
Despite the optimism, the Economic Survey for 2024–25 cautioned against several macroeconomic risks.
These include global uncertainty, exchange rate volatility, potential supply chain disruptions, and declining foreign investment. It also warned that a sharp rise in food prices could threaten overall economic stability.
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