Retail inflation eases to six-year low amid falling food prices

Retail inflation is expected to moderate to 3.0% in May, the lowest in six years, driven by falling prices of cereals and pulses, according to Union Bank of India. April CPI had already eased to 3.16%, with a broad-based decline across food and personal care categories.

While core inflation edged up slightly due to a low base effect, it remains stable, helped by weak demand and steady commodity prices. With inflation staying within the RBI’s 2–6% comfort zone since October 2024, policymakers remain optimistic about price stability in FY 2025-26.

Retail inflation, measured by the Consumer Price Index (CPI), is projected to ease further to 3.0% in May—marking a six-year low—according to a report by Union Bank of India (UBI). This moderation is primarily attributed to the sequential drop in prices of cereals and pulses, even though most other segments began showing signs of strengthening.

Data released by the Ministry of Statistics and Programme Implementation revealed that retail inflation in April fell to 3.16% from 3.34% in March. CPI inflation, a critical economic barometer, reflects the rate at which the prices of goods and services consumed by households increase over time. The decline in April was led by falling prices in vegetables, pulses and products, fruits, meat and fish, personal care and effects, as well as cereals and products.

According to the UBI report, “inflation, excluding vegetables, stayed steady at 4.11%”, while core inflation recorded a slight uptick to 4.18%. This marginal increase is mainly due to the low base effect from the previous year. However, the report pointed out that “weak demand and stable prices of most commodities (except precious metals) are expected to keep core inflation under control.”

Inflation excluding gold remained low, at 3.4% in May, slightly up from 3.3% in April. Notably, the overall CPI fell 18 basis points in April 2025 compared to the same period last year. Meanwhile, core inflation held steady at 4.09% in April, while core inflation excluding gold also remained unchanged at 3.3%.

Within the broader core inflation category, core CPI excluding transport, which had surged to 4.26% in March, softened again to 4.18%. Personal care inflation also showed some moderation, falling from 13.50% in March to 12.90% in April. Core inflation, by definition, excludes the volatile components of food and energy, offering a clearer view of long-term price trends.

The current inflation levels provide some comfort to economists and analysts, as they remain within the Reserve Bank of India’s (RBI) target range of 2-6%. “Retail inflation last breached the Reserve Bank of India’s 6% upper tolerance level in October 2024.” Since then, inflation has remained comfortably within the manageable band, which aligns with RBI’s inflation-targeting framework.

Food prices have remained a key concern for policymakers, who aim to anchor retail inflation around 4%. Following the RBI’s monetary policy review in April, the central bank reiterated that inflation is likely to stay under control in the financial year 2025-26. This outlook suggests a relatively stable price environment, underpinned by easing food inflation and moderated demand across sectors.