Opinion
Mint Quick Edit | Will inflation relief spell a stable rupee this year?
Summary
- Retail inflation in India slid to 3.3% in March from 3.6% in February, even as the Reserve Bank of India forecasts 4% for 2025-26. Price stability at long last? That would be a big win for the economy.
With food prices having eased, it seems inflation in India is at last starting to stabilize. Retail inflation, according to government data released on Tuesday, eased to 3.3% in March over the same month last year, compared with 3.6% in February.
This is the lowest reading since August 2019.
Also Read: Mint Quick Edit | Inflation: In RBI’s control at last?
Some of it may be thanks to last year’s high statistical base that made this year’s price increases look small. But a key reason was the dip in food inflation, which fell to 2.7% from 3.8%. A forecast by India’s meteorological department issued on Tuesday of above-average rainfall this year lends credibility to expectations of benign prices, as does the recent slide in global crude oil prices.
Also Read: More than a rate cut: RBI’s decision reinforces its dual mandate
The Reserve Bank of India (RBI) expects inflation to average 4% in 2025-26, a rate that it’s mandated to aim for. Although various factors could upset that estimate, should it hold good, it will finally let India claim success on inflation-targeting as an explicit policy. If market confidence can be won in RBI’s ability to keep firm control of the rupee’s domestic purchasing power, it would ease other efforts such as growth support.
Also Read: RBI has done its bit: Fiscal and trade policy moves must do the rest
In calmer times on the external front, the currency’s foreign-exchange value would hold up better too.
