India’s retail inflation, measured by the Consumer Price Index (CPI), declined to 3.16% in April 2025 from 3.34% in March. This marks the lowest inflation rate since July 2019 and the third consecutive month it has remained below the Reserve Bank of India’s (RBI) 4% target .
Key Drivers of the Decline
- Food Prices: Food inflation dropped to 1.78% in April, the lowest since October 2021, driven by an 11% year-on-year decrease in vegetable prices and a 5.23% fall in pulses .
- Rural and Urban Inflation: Rural inflation decreased to 2.92% from 3.25% in March, while urban inflation eased to 3.36% from 3.43% .
- Core Inflation: Core inflation remained stable at around 4%-4.1%, indicating that the decline is primarily due to food prices .
Implications for Monetary Policy
The sustained low inflation provides the RBI with room to consider further interest rate cuts to stimulate economic growth. Economists anticipate a cumulative rate cut of up to 75 basis points by the end of fiscal year 2026, depending on economic data and monsoon performance .
Economic Outlook
The RBI has revised its GDP growth forecast for the fiscal year to 6.5% from 6.7% and adjusted its inflation forecast from 4.2% to 4.0% . Analysts expect inflation to remain between 3.6% and 3.8% for the April-June period, assuming a normal monsoon .Reuters
