Lowest retail inflation since 2019 provides further leeway to cut rates: Experts

IANS May 13, 2025 216 views

India's retail inflation dipped to 3.16% in April, marking the lowest level since July 2019. Food inflation plunged to 1.78% as vegetable prices dropped sharply by 11% year-on-year. Economists anticipate the RBI may cut rates by 25 basis points in June given the favorable inflation trajectory. The outlook remains positive with expectations of a good monsoon and strong rabi harvest keeping prices in check.

"This is the lowest year-on-year inflation after July 2019" - Hemant Jain, PHDCCI
New Delhi, May 13: The easing of retail inflation in April is expected to further give comfort to the Reserve Bank of India (RBI) to reduce interest rates in its next bi-monthly MPC meeting, which will reduce industry debt burden, leading experts said on Tuesday.

Key Points

1

Food inflation drops to 1.78% with vegetable prices plunging 11%

2

Economists predict 25bps RBI rate cut in June policy

3

Rabi harvest and monsoon forecast to sustain low inflation

4

Core inflation remains subdued with rural CPI at 2.92%

CPI inflation for the month of April stood at 3.16 per cent (provisional).

“This is an 18 basis points decline in headline inflation of April 2025 in comparison to March 2025. However, it is the lowest year-on-year inflation after July 2019”, said Hemant Jain, President, PHDCCI.

The significant softening of CPI and food inflation last month is mainly attributed to decline in prices of vegetables, pulses and products, fruits, meat and fish, personal care and cereals, he added.

Both the rural and urban segments of the economy are witnessing softening of CPI inflation, with 2.92 per cent and 3.36 per cent in April in comparison to 5.43 per cent and 4.11 per cent, respectively in April.

“Going ahead, we expect food inflation to cool down further given the anticipation of a good monsoon. Further, the crude prices are expected to be range-bound between $60 to $65 per barrel in the short to medium term, further boosting private final consumption expenditure and, therefore, bolstering economic growth,” Jain added.

According to Dharmakirti Joshi, Chief Economist, Crisil Limited, the record rabi harvest and robust pulses output, as indicated by the Second Advance Estimates, combined with the forecast of a favourable monsoon for the upcoming kharif season, should keep food inflation in check.

“Given the current inflation trajectory, a further 25-basis point rate cut is expected in the June monetary policy review,” he mentioned.

The moderation is almost entirely food-led. Food inflation fell to 1.78 per cent, its weakest level in three-and-a-half years, as vegetables plunged -11 per cent YoY, pulses -5.2 per cent and cereal inflation eased to 5.35 per cent from 5.93 per cent.

“The data now anchor headline inflation around 3 per cent for the next two months, with food prices cushioned by ample stocks and an above-normal-monsoon forecast, and core categories capped by subdued wage-cost pass-through,” said Arsh Mogre, Economist, PL Capital.

Reader Comments

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Rajesh K.
This is great news for middle-class families like mine! Lower inflation means our monthly budget won't be stretched so thin. Hope RBI cuts rates soon so EMIs become lighter 🤞 Vegetables becoming cheaper is a big relief after last year's onion crisis!
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Priya M.
While the numbers look positive, I'm skeptical about how long this will last. Monsoon forecasts can change, and global crude prices are unpredictable. RBI should be cautious about aggressive rate cuts - we don't want to end up like Sri Lanka with runaway inflation later.
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Amit S.
As a small business owner, lower interest rates would be a blessing! Our working capital loans are eating into profits. Good to see pulses and cereals becoming affordable again - this directly impacts our canteen costs for employees.
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Sunita R.
The urban-rural divide in inflation rates is interesting. 2.92% in villages vs 3.36% in cities shows how supply chains still need improvement. Government should use this breathing room to invest more in agricultural infrastructure to sustain these gains.
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Vikram J.
Lower inflation is good, but let's not forget fuel prices are still high. When petrol/diesel costs come down, we'll see real relief. Also hoping banks actually pass on rate cuts to customers instead of just benefiting corporate loans!
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Neha P.
The vegetable price drop is seasonal - tomatoes will shoot up again in monsoon. We need long-term solutions like better cold storage. Still, as someone planning to buy a home, I'm praying for that 25bps rate cut! 🏡

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Tags:
RBI rate cut retail inflation CPI data monsoon forecast food prices Hemant Jain Dharmakirti Joshi