Opinion
Mint Quick Edit | Inflation: In RBI’s control at last?
Summary
- The cost of living eased in February, with inflation dipping below 4%. The central bank’s policy pivot last month towards growth-support looks valid. How durable price stability proves, though, is an open question.
Retail inflation in February eased to under the Reserve Bank of India’s (RBI) 4% target for the first time in six months, government data released on Wednesday showed. The consumer price index was up only 3.6% from the same month in 2024.
Also Read: Mint Quick Edit | Inflation is down: Will interest rates follow?
In January 2025, inflation was almost 4.3%. Policymakers at RBI would be heaving a sigh of relief, as the drop seems to validate their decision to cut interest rates last month in anticipation of a price cool-off. With concerns of economic growth having mounted, RBI’s next decision due in April could confirm a pivot away from inflation control to a growth-supportive monetary policy. We have better-behaved prices of food items to thank for this.
Also Read: Despite RBI's rate cut, spurring GDP growth is an uphill task
Meanwhile, the current fiscal year is likely to end with weaker output expansion than in the previous three years and it’s unclear if 2025-26 will mark a turnaround.
Also Read: Union Budget 2025: Govt dials up consumption and walks the fiscal talk
Fiscal policy has attempted to do its bit, with the Union budget unveiling tax cuts to stimulate demand. If inflation stays modest, as expected—RBI sees it averaging 4.2% in 2025-26—we can look forward to cheaper credit. But then, high global uncertainty means we can’t be sure if price stability has durably been attained.
