Retail inflation in January declined to a five-month low, affirming the Reserve Bank of India’s (RBI’s) move last week to cut interest rates for the first time in five years.

India’s Consumer Price Index (CPI)-based inflation rose 4.31% last month from a year ago, according to data released by the statistics ministry on Wednesday.

The headline number is lower than 5.22% reported in December.

The decline, which is lower than most analyst estimates, may pave the way for further cuts in interest rates if it hovers near RBI’s 4% goal.

“We expect another 25 basis points cut in April, despite the neutral stance of the policy statement. The unanimous vote for a cut, in addition to the confluence of near-term low growth and the RBI’s inflation forecasts being closer to target support our view for continued easing in April,” Aastha Gudwani, India chief economist at Barclays in India, said. One basis point is one-hundredth of a percentage point.

A significant decline in food inflation, which accounts for roughly half of the consumer price index, dragged down retail inflation, data showed.

Food inflation rose 6.02% in January, slower than the 8.39% increase in December as vegetable prices eased to 11.35% in January from a 26.56% jump the previous month.

With inflation seen averaging 4.2% in the next fiscal, RBI governor Sanjay Malhotra has flagged risks to inflation from uncertain global trade policies and adverse weather events.

A weaker domestic currency adds to RBI’s worries as it weighs on prices.

The Indian rupee, which had been losing currency to the dollar in recent weeks, rallied by the most in two years on Tuesday on RBI’s strong intervention.

Factory output growth slows in December

Meanwhile, data released separately showed the Index of Industrial Production (IIP) rose 3.2% in December, compared with a revised reading of 5% the previous month.

The IIP growth moderated on weaker manufacturing growth of 3% in December against 5.5% in November, partly weighed by an unfavorable base, CareEdge chief economist Rajani Sinha said.

With this, IIP growth has improved sequentially to 3.9% in the third quarter from a 2.7% growth in the second quarter, in line with the GDP first advance estimate released last month, Sinha said.

On the consumption front, consumer durables output increased by a healthy 8.3%. However, the sharp contraction in output of consumer non-durables at 7.6% is concerning and needs to be monitored in the coming months, Sinha noted.

“Going forward, we could see an improvement in consumption with expected moderation in food inflation and reduction in income tax burden announced in the budget,” Sinha said, adding that the government’s “continued emphasis on capex remains positive for supporting the recovery in consumption and investments.”