Will the Lowest Retail Inflation Since 2019 Lead to Rate Cuts?
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Synopsis
The recent dip in retail inflation brings hope for the Reserve Bank of India to lower interest rates, potentially easing the debt burden on industries. As inflation rates hit their lowest since July 2019, experts predict positive outcomes for the economy. What does this mean for consumers and businesses alike?
Key Takeaways
- Retail inflation in April stands at 3.16 percent.
- Lowest inflation rate since July 2019.
- Decline in food inflation driven by lower prices of vegetables and pulses.
- Expectations of further rate cuts by the RBI.
- Positive economic growth anticipated due to easing inflation.
New Delhi, May 13 (NationPress) The recent decline in retail inflation for April is likely to provide additional reassurance to the Reserve Bank of India (RBI) regarding a potential reduction in interest rates during the upcoming bi-monthly Monetary Policy Committee (MPC) meeting, thereby alleviating the debt burden on industries, experts indicated on Tuesday.
The Consumer Price Index (CPI) inflation for April was recorded at 3.16 percent (provisional).
“This represents a decrease of 18 basis points in headline inflation from March 2025, marking the lowest year-on-year inflation rate since July 2019,” stated Hemant Jain, President of PHDCCI.
The notable reduction in CPI and food inflation last month is primarily due to falling prices of vegetables, pulses, fruits, meat, fish, personal care items, and cereals, he noted.
Both rural and urban sectors are experiencing a decrease in CPI inflation, with rates of 2.92 percent and 3.36 percent in April, compared to 5.43 percent and 4.11 percent respectively in the previous year.
“Looking ahead, we anticipate that food inflation will continue to decrease, especially with expectations of a favorable monsoon. Additionally, crude oil prices are projected to remain stable between $60 and $65 per barrel in the near to mid-term, which is likely to enhance private final consumption expenditure and thus, support economic growth,” Jain added.
According to Dharmakirti Joshi, Chief Economist at Crisil Limited, the exceptional rabi harvest and strong pulses production, as suggested by the Second Advance Estimates, along with predictions of a favorable monsoon for the upcoming kharif season, should help in controlling food inflation.
“Considering the present inflation trends, a further 25-basis point reduction is anticipated during the June monetary policy review,” he noted.
The moderation is predominantly driven by food factors. Food inflation has decreased to 1.78 percent, its lowest in over three and a half years, as vegetable prices dropped by -11 percent year-on-year, pulses by -5.2 percent, and cereal inflation eased to 5.35 percent from 5.93 percent.
“The current data suggests that headline inflation will stabilize around 3 percent for the next couple of months, with food prices supported by ample stocks and a forecast for above-normal monsoon, while core categories remain constrained by modest wage-cost pass-through,” remarked Arsh Mogre, Economist at PL Capital.
Point of View
The recent decline in retail inflation is a promising sign for the Indian economy. As inflation eases, the Reserve Bank of India has a unique opportunity to lower interest rates, which could stimulate growth and lessen the financial strain on industries. This prudent approach could foster a more stable economic environment, benefiting both consumers and businesses.
NationPress
08/06/2025
Frequently Asked Questions
What is the current retail inflation rate in India?
The current retail inflation rate in India for April is 3.16 percent.
Why is the Reserve Bank of India considering a rate cut?
The RBI is considering a rate cut due to the easing of inflation, which may support economic growth and reduce the debt burden on industries.
How does food inflation affect overall inflation rates?
Food inflation has a significant impact on overall inflation rates, as it constitutes a major component of the Consumer Price Index (CPI).
What factors are contributing to the decline in food inflation?
The decline in food inflation is primarily driven by falling prices of vegetables, pulses, fruits, and cereals.
What are the predictions for future inflation rates?
Experts predict that inflation may stabilize around 3 percent in the coming months, supported by favorable monsoon forecasts.
