India’s retail inflation, as measured by the Consumer Price Index (CPI), has dropped to its lowest level in nearly six years, offering a welcome respite both for households and policymakers. April 2025 recorded a headline inflation of 3.16 per cent, significantly down from 3.34 per cent in March and a steep fall from 4.83 per cent in April last year. With food inflation plunging to 1.78 per cent — its lowest since October 2021 — the macroeconomic stage seems set for the Reserve Bank of India (RBI) to consider another round of monetary easing in its upcoming June policy review. The easing price pressures come primarily from a sharp dip in the prices of vegetables, fruits, pulses, and protein-rich foods — items that significantly impact the daily budgets of Indian households. Tomatoes, potatoes, chicken, and even arhar dal have witnessed year-on-year deflation. The drop in prices of essentials such as cereals and personal care products further amplifies the reach of this relief to rural and low-income consumers. In a country where nearly 60 per cent of household spending in rural areas goes towards food, this decline is more than a statistical dip—it is a tangible change in living costs. The National Statistics Office (NSO) data confirms a 91 basis point decline in food inflation over just one month. From 2.69 per cent in March to 1.78 per cent in April, the change suggests not just seasonal correction but potentially a stabilising supply environment, especially in perishables. Rural inflation, often more volatile and indicative of distress, declined to 2.92 per cent, down from 3.25 per cent a month earlier. Urban inflation also dipped slightly, to 3.36 per cent. Only fuel, light, and transport showed a marginal uptick, but not enough to unsettle the broader disinflationary trend. This easing comes at a crucial moment for the RBI. With inflation falling well within the 4 per cent ± 2 per cent band mandated by its charter, the central bank now has clear policy space to support growth without risking price stability. Having already delivered a 50 basis point cut in two stages this year, the Monetary Policy Committee (MPC) appears well-positioned to continue the easing cycle. The RBI’s own projections peg inflation to hover around 4 per cent for the year, with Q1 expected at 3.6 per cent, and Q2 and Q3 even lower — giving weight to forecasts of an additional 75 basis points of cuts through the year.
If GDP numbers due later this month confirm a slowdown or stagnation — Q4 growth figures will be closely watched—the RBI may even frontload the easing with a 50 basis point cut. Such proactive steps could give a much-needed boost to consumption and private investment in an otherwise tepid economic landscape. Yet, caution must prevail. While the inflation trend is promising, it is partly riding on a high base effect from 2024 and on transient drops in volatile food items. Core inflation still needs consistent moderation. Moreover, there are global headwinds—geopolitical disruptions, oil price uncertainties, and monetary tightening in major economies—that can reverse sentiment quickly. The RBI would be wise to act decisively, but not hastily. Policymakers must also ensure this disinflation is durable and not just a passing phase. Structural improvements in agricultural logistics, better forecasting of food production, and stronger rural procurement systems are vital to maintaining price stability. Price drops in essential commodities, if not managed well, can hurt farmers and producers, especially in the absence of robust market linkages and government support mechanisms. Finally, the state-level disparity in inflation — ranging from 1.26 per cent in Telangana to nearly 6% per cent in Kerala — highlights that a “national average” doesn’t capture the lived realities across India. Policymaking, both fiscal and monetary, must account for this diversity in order to be truly effective. In sum, the inflation data paints a hopeful picture. The easing of price pressures offers not just comfort to consumers but also a strategic opportunity for the RBI to calibrate monetary policy in favour of growth. With prudence and foresight, India can use this disinflationary window to stabilise its economy and energise its recovery.