Retail inflation eases to near six-year low in April

India’s retail inflation eased to a near six-year low in April on a slowing increase in food prices, opening up space for more interest rate cuts by the Reserve Bank of India (RBI).

The Consumer Price Index (CPI) rose 3.16% from a year ago, the slowest since July 2019, statistics ministry data showed on Tuesday, staying below the RBI’s 4% target for a third month.

In March, inflation had declined to 3.34%.

Food inflation, which accounts for nearly half of the consumption basket, slowed to 1.78% in April from 2.69% in March, the lowest since October 2021, on a decline in vegetables, pulses, cereals inflation.

Vegetable prices declined 11% year-on-year when compared with a 7.04% fall in March. Prices of cereals rose 5.35% when compared with a 5.93% increase in March.

Food and beverage inflation fell to 2.1% in February, down from 2.9% in January.

Deflation in vegetables, pulses, spices, and meat aided in the moderation of food inflation, Rajani Sinha, chief economist at Care Edge, said.

However, double-digit inflation in edible oils and fruits partially capped the moderation. Core inflation continued to remain benign at 4.1%.

Last month, RBI pared its key policy rate for a second time in a row, and changed its policy stance to ‘accommodative’ from ‘neutral,’ signaling more cuts are in the offing.

It lowered the benchmark repurchase rate by a quarter point to 6%.

Several economists polled by Bloomberg expect the repo rate to drop to as low as 5%, or 100 basis points more in cuts, in this easing cycle. One basis point is one-hundredth of a percentage point.

The reading below RBI’s 4% target, and this week’s ceasefire between India and Pakistan allows the central bank to stay on the loose monetary policy path to boost growth.

Moreover, lower crude prices and bountiful rains–as forecasted by India’s Met department, will act as tailwinds for RBI to keep prices in check.

International commodity prices are lower

“International commodity prices have declined following the escalation of the tariff war, reflecting growing pessimism regarding the global economy’s growth momentum,” Sinha said. In April, average Brent crude prices dropped 25% y-o-y, while the Bloomberg Industrial Metals Subindex fell by 0.7% year over year.

Additionally, the recent fall in the dollar index alleviates the risks of imported inflation. Care Edge projected CPI inflation to stay comfortable, supported by moderating food inflation.

“On the monetary policy front, moderating inflation should comfort the Monitory Policy Committee in undertaking further rate cuts. We expect a further 50 basis points reduction in the policy rate in FY26,” SInha added.