India’s retail inflation falls to six-year low in April, driven by softer food prices

India’s retail inflation cooled to 3.16% in April, down from 3.34% in March, driven largely by a continued softening in food prices. This is the third straight month that inflation has remained below the Reserve Bank of India’s (RBI) medium-term target of 4%. The figure came in lower than economists’ forecast of 3.27%, indicating stronger-than-expected price stability.

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India’s retail inflation dropped to a six-year low of 3.16% in April 2025, down from 3.34% in March, signaling a significant easing of price pressures in the economy. The decline was largely driven by a sharp moderation in food prices, especially vegetables and pulses, which constitute nearly 50% of the Consumer Price Index (CPI) basket. This marks the third consecutive month that retail inflation has remained below the Reserve Bank of India’s (RBI) 4% medium-term target, offering relief to consumers and raising expectations of future rate cuts by the central bank.

The latest inflation reading is the lowest since July 2019, when CPI inflation stood at 3.15%. According to a Reuters poll of 43 economists, inflation was expected to fall to 3.27% in April, but the actual figure came in even lower, reflecting better-than-anticipated food supply conditions.

Food Prices Ease Despite Heatwaves

In April, food inflation eased significantly to 1.78%, compared to 2.69% in March. Despite intense summer heatwaves, India witnessed a robust harvest, which helped stabilize supply chains and keep food prices under control. Notably, vegetable prices declined 11% year-on-year, a sharper drop than the 7.04% fall recorded in March.

Cereal inflation moderated as well, rising 5.35% year-on-year compared to 5.93% in March, while pulses saw a deflation of 5.23%, improving from a 2.73% decline in the previous month. These trends reflect not just seasonal supply improvements but also the broader benefits of better agricultural productivity and logistics infrastructure.

Urban and Rural Inflation Trends

Inflation decelerated across both urban and rural areas, although the pace of moderation was slightly higher in rural regions. Rural inflation fell to 2.92% in April, down from 3.25% in March, while urban inflation eased marginally to 3.36% from 3.43%. This convergence is noteworthy, especially in a country where food and fuel form a larger share of rural household expenditure.

Additionally, the Wholesale Price Index (WPI), which reflects price trends at the producer level, is expected to have eased to 1.76% in April, down from 2.05% in March, indicating a broad-based reduction in inflationary pressures across the economy.

The steady decline in inflation offers the Reserve Bank of India greater flexibility in its monetary policy stance. At its most recent Monetary Policy Committee (MPC) meeting, RBI Governor Sanjay Malhotra emphasized that inflation has been on a downward trajectory, largely supported by favorable food price trends. He also highlighted that the central bank remains optimistic about further disinflation in FY26, while remaining cautious about global uncertainties that could impact commodity prices and supply chains.

According to the RBI’s projections for FY2025-26, CPI inflation is expected to average 4% for the year, with a quarterly breakdown as follows:

• Q1: 3.6%
• Q2: 3.9%
• Q3: 3.8%
• Q4: 4.4%

This forecast reflects a stable inflation path that aligns closely with the central bank’s medium-term target, creating a conducive environment for potential rate cuts to support India’s slowing economic growth.

The outlook for the coming months remains positive, especially with early forecasts predicting above-average monsoon rainfall. This could bolster agricultural output, enhance rural demand, and maintain the current disinflationary momentum.

If inflation continues to stay subdued, the RBI may consider loosening monetary policy in the latter half of the year, offering a much-needed stimulus to sectors facing sluggish demand. For now, the continued moderation in retail inflation brings welcome relief to households and signals a period of greater price stability in the Indian economy.