India CPI Review: Soft Inflation Persists, RBI Gets Breathing Room

India’s retail inflation cooled further in April, with headline CPI easing to 3.16% yr/yr, its lowest level since July 2019. The latest print—down from 3.3% in March and well below the RBI’s 4% target—marks the sixth consecutive monthly decline and underscores the broad-based easing in price pressures.

The drop was primarily driven by food inflation, which fell sharply to 1.8% yr/yr, the lowest since October 2021. A resilient rabi harvest helped suppress prices of vegetables, cereals, fruits, and pulses, defying expectations of heat-driven volatility. Core inflation remained stable, while housing, health, and education services saw only marginal movement. Inflation eased across both rural and urban segments, with the rural CPI slowing to 2.92% and urban inflation dipping to 3.36%. State-level data showed wide divergence—Kerala led with the highest inflation at 5.94%, while Telangana posted just 1.26%, reinforcing regional supply-demand disparities.

Among category-specific shifts, fuel and light inflation saw a notable uptick, rising to 2.9% from 1.4% in March, and transport costs edged higher. Meanwhile, health and education inflation remained sticky, though within a manageable band. With inflation now firmly below target, the case for further monetary easing has strengthened. We anticipate atleast two more rate cuts this year, especially as global growth risks persist. The RBI’s June 4–6 policy meeting will likely bring another 25bps rate cut. 

For now, the disinflation narrative remains intact—anchored by resilient food supply and modest core pressures. But risks remain from global commodity price swings, monsoon variability, and second-round effects in services inflation. The RBI’s challenge will be to navigate these headwinds while preserving space for growth-supportive policy.