Aniket PujariPeople buying vegetables at a local market in Noida, Uttar Pradesh on August 22, 2023. (Photo by Chandradeep Kumar/ The India Today Group via Getty Images)
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India’s inflation rate in February fell to a lower-than-expected 3.61% in February, the country’s Ministry of Statistics and Programme Implementation said Wednesday.
Economists polled by Reuters had expected a reading of 3.98% for the period. This is first time since last summer that inflation has come in below the RBI’s target of 4%.
In a note on March 5, Bank of America analysts flagged that vegetable prices in particular have fallen sharply since October given higher supplies, especially for potatoes and tomatoes.
“We do expect the correction in vegetable prices to start reversing, possibly as early as March, with risks from heatwaves and weather-related disruptions to crops,” they added.
Wednesday’s inflation data comes after GDP growth in India just missed expectations for the fourth quarter, coming in at 6.2%. Over the financial year to March 2025, the economy is expected to have grown by 6.5% — a sharp slowdown from 9.2% the year before.
Bank of America analysts said that monetary policy in the country has now “pivoted firmly to support growth” as medium-term inflation forecasts are around the Reserve Bank of India’s 4% target.
The analysts are expecting 100 basis points worth of cuts by the RBI by the end of 2025, including the 25-basis-point reduction delivered in February. “This will bring the repo rate to 5.50% by end-2025, which we identify as being close to the neutral rate,” they said.
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