February Inflation: Onion, Potato And Tomato Prices To Help Ease CPI Below RBI Target
The Consumer Price Index-based inflation is projected to rise by 3.98% in February, compared to 4.31% in January.
India's retail inflation is likely to continue to ease in February, led by lower vegetable prices. The Consumer Price Index-based inflation is projected to rise by 3.98% in February, compared to 4.31% in January, according to a median forecast of 36 economists polled by Bloomberg.
The CPI reading for the month of February is likely to mark the fourth straight month of decline after having risen above the central bank's upper tolerance level of 4(+/-2)% in October last year.
There has been a chunky drop in headline CPI inflation in February, possibly below 4%, as food prices, especially for vegetables, continued to ease, said Dhiraj Nim, economist at ANZ. The moderation in headline CPI inflation is led by food inflation, with winter season disinflation in vegetable prices and more encouraging moderation in cereals and pulses, said Gaura Sengupta, chief economist at IDFC First Bank.
In key vegetables, for the month of February, prices of potatoes, onions and tomatoes fell compared to a month ago, according to data from the Ministry of Consumer Affairs.
Prices of pulses including tur, urad and moong also declined, though edible oils prices continued to surge annually.
"We believe this disinflation has legs and is significant, for it will mean a reset of inflation projections and the RBI could achieve its inflation target on a durable basis sooner than previously expected," Nim said. If extreme weather remains at bay, it is even possible that CPI inflation will remain around or below 4% for the whole of 2025, according to him.
Potential inflationary pressure from global tariff policies, chances of a hotter summer impacting crop yields and early signs of rise in base metal prices, pose upside risks to inflation outlook, stated a note by the Bank of Baroda.
"Based on our CPI estimate for FY26, we see space for another 50 basis points cut," Sengupta said, penciling in a 25 bps cut in April and 25 bps in June. FY26 CPI inflation is averaging at about 4%, which implies that real policy rates will rise to 2.25% which is restrictive, Gaura said. As per RBI’s estimate, neutral policy rate is between 1.4% to 1.9%.
