India’s retail inflation eased to 3.61 per cent in February, which is the lowest in the last seven months. In January it was at 4.31 per cent, according to government data released on Wednesday.

The decline was largely driven by lower food prices, with food inflation - comprising nearly half of the Consumer Price Index (CPI) basket - falling to 3.75 per cent in February from 5.97 per cent in January.

"Food inflation in February 2025 is the lowest since May 2023," the official data say. The significant decline in headline inflation and food inflation during February is mainly attributed to the decline in inflation of vegetables, egg, meat, and fish, pulses and products; and milk and products. Vegetable inflation has come down to to 1.07 per cent year-on-year.

The key items having the lowest year-on-year inflation in February are ginger (-35.81 per cent), jeera (-28.77 per cent), tomato (-28.51 per cent), cauliflower (-21.19 per cent), garlic (-20.32 per cent), official figures show.

Prices of cereals rose 6.10 per cent as against 6.24 per cent in January, while those of pulses contracted 0.35 per cent compared to a growth of 2.59 per cent in the previous month. Meanwhile, the rural inflation cooled to 3.79 per cent compared to 4.59 per cent in January, while urban inflation stood at 3.32 per cent as against 3.87 the previous month.

Prices of fuel came down during the month, easing the burden on household budgets with inflation being recorded at (-) 1.33 per cent during February.

In its February meeting, the Reserve Bank of India’s Monetary Policy Committee (MPC) noted that inflation had declined, driven by a favorable outlook on food prices. The central bank expects inflation to moderate further in the fiscal year 2025-26, providing relief to Indian households.

The RBI, which has been mandated to ensure retail inflation remains at 4 per cent (+/- 2 per cent), has reduced the short-term lending rate (repo) by 25 basis points last month on easing concerns on the inflation front.

The central bank is scheduled to announce the next set of bi-monthly monetary policy on April 9.