India’s retail inflation cooled to a near six-year low of 3.16 percent in April 2025, driven by a broad-based drop in food prices, but economists expect a marginal uptick to around 3.5 percent in May due to a likely surge in vegetable prices in the latter half of the month.
“With the vegetable index dipping further, and compressing the food inflation, the headline CPI inflation eased further to a 69-month low of 3.16 percent in April 2025,” said Aditi Nayar, Chief Economist and Head – Research & Outreach at ICRA Limited. “While the recent rise in temperatures in North India and unseasonal rainfall in parts of peninsular India may cause a spike in vegetable prices in the second half of May, boosting the CPI inflation print, we project it to print around 3.5 percent in the ongoing month.”
Official data released by the Ministry of Statistics on May 13 showed headline inflation declined from 3.34 percent in March, marking the lowest year-on-year print since July 2019. The easing was primarily led by food inflation, which slowed to 1.78 percent in April from 2.69 percent a month earlier.
Vegetable prices declined 11 percent year-on-year in April, a sharper fall than the 7.04 percent drop recorded in March. Inflation in cereals eased to 5.35 percent from 5.93 percent, while pulses prices contracted 5.23 percent compared to a 2.73 percent drop in the previous month.
Rate Cuts on the Horizon
Economists believe the latest inflation data will give the Reserve Bank of India (RBI) further space to ease interest rates in its upcoming monetary policy meetings, as it continues to balance price stability with support for growth.
“The CPI print on May 13 sets the stage for another rate cut by the RBI in its June policy of 25 bps. Inflation inched down to 3.16 percent in April on the back of a continuous broad-based drop in food prices, including vegetables, cereals and pulses,” said Sakshi Gupta, Principal Economist, HDFC Bank. “Looking ahead, inflation is expected to remain close to 3 percent over the coming two months. The expectation of an above-normal monsoon and low commodity prices bode well for the inflation trajectory through the year. We expect inflation to average at 3.7 percent in FY26.”
With inflation remaining below the RBI’s 4 percent medium-term target for two straight months and the growth momentum showing signs of plateauing, the June monetary policy could mark the beginning of a fresh rate-cutting cycle.
“We anticipate the CPI inflation to average 3.5 percent in FY2026, with the prints for Q2 and Q3 sharply trailing the MPC's projections for these quarters, allowing for an additional 75 bps of rate cuts in this calendar year,” Nayar said. “A 25 bps rate cut appears forthcoming in the June 2025 policy, followed by easing of 25 bps each in the August and October 2025 policy reviews. If the GDP growth print for Q4 FY2025 does not report an acceleration from the 6.2 percent seen for Q3 FY2025, the MPC may consider frontloading the rate easing, with a 50 bps cut in the upcoming review.”
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