Retail inflation declines to 6-year low in April

New Delhi: India’s retail inflation declined to a near six-year low of 3.16% in April from 3.34% in March, driven by moderation in food prices, according to data released by the National Statistics Office (NSO) on Tuesday.

This marks the third consecutive month that inflation has remained below the Reserve Bank of India’s medium-term target of 4%. The April inflation print is the lowest since July 2019.

Food inflation, which accounts for nearly half of the Consumer Price Index (CPI) basket, declined to a 42-month low of 1.78% in April from 2.69% in March. CPI inflation, which the RBI monitors for its monetary policy action, has declined consistently after touching 6.21% in October. April was the sixth consecutive month of decline in retail inflation.

Analysts said the April data would give comfort to the RBI to further lower policy interest rates. The central bank has cut rates twice this year. The next bi-monthly meeting of the RBI’s Monetary Policy Committee is scheduled for early June.

“Given the current inflation trajectory, a further 25-basis point rate cut is expected in the June monetary policy review,” said Dharmakirti Joshi, Chief Economist, Crisil.

Rajani Sinha, Chief Economist, CareEdge Ratings, said, “Moderating inflation should provide comfort to the MPC in undertaking further rate cuts. We expect a further 50 bps reduction in the policy rate in FY26.”

Paras Jasrai, Associate Director at India Ratings and Research, said the RBI is likely to cut the repo rate at least by 75 basis points in the rest of 2025-26. It has already cut the policy repo rate by 25 basis points in the first month of the current financial year. Jasrai said a 25 basis points rate cut is expected in June. 

Moderation in food inflation in April was largely due to substantial decline in prices of vegetables, pulses and spices. Average price of vegetables in the retail market was 11% lower when compared with the same month last year. Pulses became cheaper by 5.23% while the price of spices declined by 3.40% year-on-year during the month under review.

However, the price of fruits jumped by 13.80%. Oil and fats became costlier by 17.42% while the price of milk and milk products rose by 2.72%.

Decline in commodity prices in the international markets amid escalation of tariff war has also led to softening in general price rise in India.

In April, average Brent crude prices dropped by nearly 25% year-on-year, while the Bloomberg Industrial Metals Subindex fell by 0.7%.

“The imposition of US tariffs has further heightened concerns over dumping, as these measures could lead to an oversupply in global markets due to surplus production from China,” said Sinha.

Interestingly, retail inflation excluding vegetables and pulses shot up to an 18-month high of 4.4% in April. This reflects that the moderation in the overall CPI data is largely due to decline in the price of key food items.

“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% in the ongoing month,” said Aditi Nayar, chief economist at ICRA.