Synopsis
The recent decline in CPI inflation is anticipated to significantly enhance India's private final consumption expenditure, a key GDP component. Industry experts believe this trend may encourage the RBI to lower interest rates, further alleviating the debt burden on industries.Key Takeaways
- Decline in CPI inflation boosts consumption expenditure.
- RBI likely to reduce interest rates soon.
- Consumer inflation at a five-and-a-half-year low.
- Core inflation remains a concern above 4 percent.
- Global factors could impact inflation trends.
New Delhi, April 15 (NationPress) The decline in CPI inflation is set to enhance India's private final consumption expenditure, which is the most significant part of the GDP, industry experts remarked on Tuesday.
This trend will also provide the RBI with the confidence to lower interest rates in the upcoming bi-monthly MPC meeting, consequently easing the debt burden on industries, stated Hemant Jain, President of PHDCCI.
The CPI inflation is currently experiencing a downward trajectory, showing a year-on-year change of 3.34 percent in March 2025 compared to March 2024.
Consumer headline inflation has dropped to a five-and-a-half-year low in March 2025, attributed to seasonal declines in vegetable prices, although core inflation persists at above 4 percent.
“For commercial banks, it is essential to relay the advantages of rate reductions to consumers to bolster domestic consumption and growth. This is crucial for enhancing demand in the affordable housing sector,” stated Vivek Rathi, National Director of Research at Knight Frank India.
Looking forward, the recovery of the Indian rupee and the significant reduction in crude oil prices provide some relief from external price pressures. However, disruptions in global supply chains due to reciprocal trade tariffs could pose upward risks to inflation, he cautioned.
Jain anticipates that CPI inflation will remain comfortably within the RBI's target band, thanks to forecasts of a normal monsoon and decreasing international crude oil prices.
“Crude prices are projected to stabilize between US$60 to US$65 per barrel in the near to medium term, further enhancing private final consumption expenditure and thereby supporting economic growth,” Jain added.
Mahendra Patil, Founder and Managing Partner of MP Financial Advisory, noted that rural inflation experienced a significant slowdown to 3.25 percent, while urban inflation remained stable at 3.43 percent, with urban food inflation plummeting to 2.48 percent.
“Inflation in housing, education, and health saw slight increases, while fuel and light inflation turned positive at 1.48 percent after several months of decline. The reduction in both headline and core inflation solidifies the case for a possible policy rate cut by the Reserve Bank of India in the near future,” Patil remarked.
With inflation now comfortably within the central bank's 4 percent target and core price pressures subdued, the latest data highlights a favorable macroeconomic landscape for monetary easing, provided food inflation remains controlled and global risks are minimal.
