inflation: India’s retail inflation eases to a 6-year low of 3.16% in April

India’s retail inflation eased to a six-year low of 3.16 per cent in April from 3.34 per cent in March, driven by a further moderation in food prices. This marks the third consecutive month that inflation has remained below the Reserve Bank of India’s 4% medium-term target.

A Reuters poll of 43 economists suggested inflation fell to 3.27% in April.

Food inflation, which accounts for nearly half of the Consumer Price Index (CPI) basket, slowed to 1.78 per cent in April, compared to 2.69 per cent in March.

Intense heatwaves this summer did little to affect a robust harvest, offering much-needed relief to many Indian households, which allocate a significant portion of their budgets to food.

Rural inflation cooled to 2.92 per cent in April from 3.25 per cent in March, while urban inflation contracted to 3.36% compared to 3.43 per cent a month earlier.

The Consumer Price Index (CPI) based inflation was 3.34 per cent in March and 4.83 per cent in April 2024. It was 3.15 per cent in July 2019.

“Inflation inched down to 3.16% in April on the back of a continuous broad-based drop in food prices, including of vegetables, cereals and pulses. The CPI print today sets the stage for another rate cut by the RBI (Reserve Bank of India) in its June meeting, of 25 basis points,” said Sakshi Gupta, Principal Economist, HDFC Bank, Gurugram.

Kitchen staples

Vegetable prices fell 11% year-on-year in April, compared to a 7.04% fall in March.

Prices of cereals rose 5.35% against a 5.93% increase in March, while those of pulses fell 5.23% compared to a 2.73% fall in the same period.

Early predictions of above-average monsoon rains this year have raised expectations of stronger agricultural output and higher rural demand in a largely agriculture-dependent economy.

Wholesale price index-based inflation is expected to have eased to 1.76% last month, down from 2.05% in March, the survey also showed.

More room for RBI rate cuts

With inflation predicted to stay subdued, the RBI has more room to cut interest rates to support a slowing economy.

RBI Governor Sanjay Malhotra, while announcing the Monetary Policy Committee’s decision last month, said that inflation has been on a downward trend, supported by a favourable outlook on food prices.

He noted that inflation is expected to ease further in FY26, potentially offering relief to households grappling with cost pressures. However, the central bank cautioned that it remains alert of global uncertainties.

The central bank has projected the CPI inflation for the financial year 2025-26 at 4 per cent, with Q1 at 3.6 per cent; Q2 at 3.9 per cent; Q3 at 3.8 per cent; and Q4 at 4.4 per cent.