However, we are looking forward to FY26, so inflation is expected to be between 4.0% and 4.2%, with core inflation expected to range from 4.2% to 4.4%.
Given this trend, analysts expect a reduction of at least 75 base point rates during this cycle, with consecutive cuts expected in April and June 2025. Another round-rate reduction could continue in October 2025.
“This month’s benign inflation and future cumulative cycle rate reductions are expected to be at least 75 basis points. The next policy will be reduced in April and June 2025 for consecutive years.
India’s consumer price index (CPI) inflation fell to a seven-month low of 3.6% in February 2025, mainly due to a sharp decline in food prices.
Food & beverage inflation has been eased to 3.84% as plant-based prices fell significantly. In particular, vegetable inflation has been negative for the first time in 20 months, led to a significant drop in prices for garlic, potatoes and tomatoes. Experts believe that the ongoing Mahakam Festival plays a role in reducing garlic consumption, but increased demand during the fasting period caused a surge in fruit prices.
This increase is driven by higher prices for precious metals, oils and chemicals. Rupee depreciation could further affect inflation in the coming months.
Meanwhile, India’s industrial production (IIP) increased by 5% in January 2025, up from 3.2% in December 2024.
The manufacturing sector increased by 5.5%, while mining increased by 4.4%. However, cumulative growth from April 2024 to January 2025 was 4.2%, lower than the 6% recorded in the same period last year.
The Indian corporate sector has shown resilience despite economic fluctuations. Approximately 4,000 listed companies reported a revenue growth rate of 6.2% in the third quarter, with EBITDA rising 11% compared to the previous year and profit after tax (PAT) rising 12%. Sectors such as capital goods, consumer durables, FMCG, healthcare and pharmaceuticals recorded robust growth.
India’s economy appears to be on a stable path due to low inflation, expected interest rate cuts and strong corporate performance. However, the rise in imported inflation and global economic uncertainty remain important factors to watch for the coming months.
