India’s retail inflation for April 2025 fell to a remarkable six-year low, with the Consumer Price Index (CPI) registering a reading of 3.16 percent, compared to 3.34 percent in March. This marks the lowest inflation print since July 2019, driven primarily by an 11 percent year-on-year decline in volatile vegetable prices. The sharp drop in food costs has dramatically altered the inflation landscape and now presents the Reserve Bank of India (RBI) with a fresh policy opportunity. With the next Monetary Policy Committee (MPC) meeting scheduled from June 4 to 6, analysts are watching closely to see whether the central bank will pivot toward a more dovish stance, especially as inflation drops below its medium-term target of 4 percent.
Highlights:
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April CPI inflation falls to 3.16%, lowest since July 2019.
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Vegetable prices drop 11% YoY, significantly dragging down headline inflation.
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RBI’s June policy meet may weigh inflation drop against monsoon risks and sectoral pressures.
Vegetables Drive Price Cooling, but Core Pressures Linger Beneath the Surface
A closer examination of the CPI basket reveals that the cooling in inflation is largely concentrated in a few food categories. Vegetables—traditionally the most volatile component—fell 11 percent in April after already declining 7.04 percent in March. This dramatic plunge has helped shift food inflation to just 1.78 percent, offering temporary relief to Indian households. Cereal inflation also eased, registering 5.35 percent compared to 5.93 percent in March, while pulses posted a meaningful deceleration at 5.23 percent. However, the composition of the CPI shows that vegetables only account for around 6 percent of the overall index. If vegetable price movements are excluded, the inflation rate for April would have been closer to 4.1 percent—still under control, but less benign than the headline figure suggests.
Highlights:
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Food inflation eases to 1.78%, mainly due to vegetable and pulse price drops.
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Vegetables, with only 6% CPI weight, disproportionately skew headline data.
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Adjusted inflation without vegetable impact hovers around 4.1%.
Sticky Core Components Keep MPC on Guard as Services Inflation Remains Elevated
While the headline CPI offers a sense of relief, inflation in the core categories—particularly services and miscellaneous segments—continues to remain sticky. The miscellaneous group, which includes health, education, and personal care, posted an inflation rate of 5 percent. Within this segment, education saw a rise of 4.1 percent, while health-related services increased by 4.2 percent. Gold-linked price pressures have also led to costlier personal care items, adding to household expense burdens. This persistent inflation in non-food and non-fuel categories suggests that demand-side pressures still remain, which could influence the RBI’s decision to avoid premature rate cuts without broader disinflation signals.
Highlights:
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Miscellaneous CPI category records 5% inflation due to rising education and health costs.
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Services inflation remains elevated, pointing to strong demand and pricing power.
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Core inflation trends may compel RBI to adopt a wait-and-watch stance.
Monsoon Forecasts and Crude Oil Trends Offer Further Support to Policy Doves
The India Meteorological Department has forecast an above-normal monsoon for 2025, which could be instrumental in ensuring a stable agricultural output and continued softening in food prices. Additionally, global crude oil prices have recently trended lower, providing India—a major oil importer—with more fiscal space and reduced inflationary pressure from fuel costs. These two macroeconomic developments create a favorable backdrop for the RBI to consider monetary easing. Economists are projecting May CPI to average around 3.5 percent and expect inflation to remain below the central bank’s Q2 and Q3 targets throughout FY26, offering room for more growth-focused policy actions.
Highlights:
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IMD predicts above-normal monsoon, positive for food price stability.
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Declining crude oil prices reduce imported inflation risks.
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FY26 inflation expected to average 3.5%, below RBI’s mid-year projections.
Growing Case for June Rate Cut as Repo Sits at 6%, But MPC May Still Err on Side of Caution
The current repo rate stands at 6 percent, following a series of 25 basis point cuts by the MPC since February. With headline inflation now decisively under the RBI’s 4 percent target, and macro tailwinds from monsoon forecasts and oil prices, there is a mounting argument for a further rate cut in June. Such a move would send a strong pro-growth signal without jeopardizing inflation control, especially as real interest rates remain high. However, the central bank’s cautious posture in recent months may persist if it opts to wait for more data to confirm that the disinflation trend is sustainable and not just a product of temporary food price swings.
Highlights:
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Repo rate currently at 6% after three consecutive 25 bps cuts since February.
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Low inflation strengthens case for June rate cut to support growth.
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MPC may delay easing if risks of temporary disinflation remain.
