India's retail inflation eases to 3.16 pc in April, lowest since July 2019

Food inflation, which accounts for nearly half of the Consumer Price Index (CPI) basket, slowed to 1.78 per cent in April, compared to 2.69 per cent in March.

This is for the third month in row that inflation has stayed below the RBI’s 4 per cent medium-term target and will enable the central bank to continue with its soft money policy to spur economic growth.

India’s annual inflation rate based on the Consumer Price Index (CPI) declined to 3.34 per cent in March this year, compared to the same month of the previous year, which was the lowest level since August 2019.

Retail inflation in the country has been on a declining trend in recent months. The Reserve Bank’s Monetary Policy Committee has reduced its inflation forecast for 2025-26 to 4 per cent from 4.2 per cent earlier as the “outlook for food inflation has turned decisively positive,” said RBI Governor Sanjay Malhotra during the monetary policy review meeting recently.

The outlook for food inflation has turned decisively positive. The uncertainties regarding rabi crops have abated considerably and the second advance estimates point to a record wheat production and higher production of key pulses over that last year, the RBI Governor pointed out.

He observed that along with robust kharif arrivals, this is expected to set the stage for a durable softening of food inflation.

“The sharp decline in inflation expectations in our latest survey for three months and one year ahead would also help anchor inflation expectations, going ahead,” he pointed out.

Furthermore, the fall in crude oil prices augurs well for the inflation outlook. Concerns on lingering global market uncertainties and recurrence of adverse weather-related supply disruptions, however, pose upside risks to the inflation trajectory.

He said that taking all these factors into consideration, and assuming a normal monsoon, CPI inflation for the financial year 2025-26 is projected at 4.0 per cent, with Q1 at 3.6 per cent; Q2 at 3.9 per cent; Q3 at 3.8 per cent; and Q4 at 4.4 per cent. Malhotra also sees the risks are evenly balanced.