India CPI Preview: Cooling Prices, Warming Room for Rate Cuts

India’s retail inflation likely moderated further in April, with headline CPI expected to fall to 3.2% — its lowest level since mid-2019. If confirmed, this would mark the third consecutive month below the Reserve Bank of India’s (RBI) 4% medium-term target, offering welcome relief to consumers and policymakers alike. Our forecast is underpinned by the continued deceleration in food prices, which make up nearly half the CPI basket and have remained unexpectedly subdued despite peak summer pressures.

Early data signals a sharp cooling in vegetable, cereal, and pulse prices, supported by improved agricultural output and more efficient supply chains. Unseasonably stable pricing for perishables — which typically see spikes in April — has defied historical trends. This, combined with expectations of a strong monsoon, sets a benign tone for inflation in the near term and supports rural sentiment ahead of the kharif sowing season. Services inflation remains sticky in parts, but early signs of easing in categories such as housing and transport are encouraging. Wholesale price inflation is also likely to have edged down, indicating broad-based disinflationary momentum.

With inflation drifting lower and growth showing signs of fatigue, the macro environment is tilting in favour of further monetary easing. The RBI’s 25-basis point rate cut in April was a clear signal of its dovish pivot. Given our forecast of average CPI inflation remaining around 4.0% in FY26, we anticipate another 25-basis point cut in June, barring any major upside shocks.

Risks remain — from climatic variability to global commodity price swings and heightened tensions with Pakistan— but for now, the data aligns in the RBI’s favour. The April CPI print, due on May 12, will be watched closely for confirmation. If our estimates hold, it could mark a turning point — not just for household budgets, but for India’s policy stance in a year of competing growth and fiscal pressures.