India’s CPI inflation eased further to a 69-month low of 3.16% in Apr-25 from 3.34% in Mar-25. This was broadly in line with market expectations, marking the third consecutive reading below 4.0%.

 Key highlights of Apr-25 data

• On a sequential basis, CPI posted a mild increase of 0.31% MoM, compared to the historical average increase of 0.8% recorded in the month of April. 
• Annualised food inflation softened to a 42-month low of 2.14%YoY. Sequentially, the price correction was driven by vegetables, pulses, cereals, eggs and spices. As such, 
  1. Vegetable inflation eased to a 26-month low of -11.0% YoY. 
  2. Pulses inflation fell to an over 6-year low of -5.23%YoY
• Consolidated fuel inflation inched up to a 20-month high of 2.3%YoY. This was led by a 3.6%MoM jump in LPG index, owing to the Rs 50 hike in the price of LPG cylinder announced in early Apr-25.
• Core CPI inflation (i.e., CPI ex Food & Beverages, Fuel & Light, and petrol and diesel items within the Miscellaneous basket) rose further to 4.4% in Apr-25 from 4.3% in Mar-25. 
  1. The bulk of the price pressures within Core CPI has been driven by Miscellaneous sub-category, inflation for which exceeded 5.0% in Apr-25 – for the first time in the last 21 months, compared to 3.54% a year ago. 
  2. While revision of telecom tariffs (last year) explains the upside partially, the bulk has been led by hardening of gold prices within the Personal Care and Effects sub-category. 

Inference and Outlook

Despite an early and intense onset of summer this year, the moderation in the price of perishables, especially vegetables, in Apr-25, is comforting. Food momentum, as of Apr-25, has recorded six consecutive months of contraction, marking the longest streak of correction on the current CPI series beginning 2011.

Having said that, the outlook for food inflation remains benign, amidst –

• An above normal prediction of Southwest monsoon, at 105% of Long Period Average (LPA), as per IMD (Indian Meteorological Department).
• In a more recent update, IMD predicts an early onset of monsoon, with rainfall commencing on 27th May- 25 in Kerala – the southernmost state of the Indian mainland, i.e., 5 days earlier than the normal onset date. This should help offer respite to predicted heatwaves, while auguring well for the Kharif season. 
• Sowing of summer crop, as of 25^th Apr-25, stands 15.3% higher compared to last year, led by rice recording a 14.6% increase in area sown. 
• Rabi harvesting has progressed well, not just for foodgrains but also for horticulture crops, with Onions, Tomato and Potatoes all three recording an improvement in area sown over the previous year. 
• Keeping in mind the expectation of above normal monsoon, Government has set a target of 354.64 mn tonnes of foodgrain production for 2025-26, compared to last year’s target of 341.55 mn tonnes.

In addition, from a global perspective –

• The 90-day suspension of US-China trade tariffs eases global trade uncertainty, with bilateral trade negotiations now taking centre stage. This should help ease logistics and shipping costs. 
• Further, crude prices continue to remain benign, especially after the OPEC+ decision to expedite output additions in the coming months. A pass-through of softened global prices to retail consumers could offer additional reprieve to CPI inflation. 
• These global cross currents should help counter imported inflation pressures emanating from the depreciation of the Rupee since H2 FY25.

Amidst the strength in recent food price correction, a surplus Southwest monsoon outlook, and easing of external risks at the margin, we revise our FY26 CPI inflation forecast lower by 30 bps to 3.8% now.

This cements our view of two additional 25 bps cuts by the RBI in the upcoming policy meetings of Jun-25 and Aug-25. With inflation set to slip below 4.0% (i.e., the inflation target as well as RBI’s projection for FY26), and the possibility of further downside emanating from domestic fuel price cuts, a deeper rate-cutting cycle amidst growth concerns cannot be ruled out.

Below is Acuité Ratings & Research Limited's comment:

“The April CPI data shows a significant deceleration in headline inflation to 3.16% YoY, the lowest since July 2019, aligning closely with our forecast of 3.2%. This decline is primarily driven by a sharp and sustained moderation in food prices, which have fallen to almost a 3 and a half year low of 2.14%. Categories such as vegetables, pulses, cereals, meat, and fish have led the cooling prices, offering relief to consumers after months of pressure. However, while food inflation has softened, core inflation remains a concern, particularly in non-food sectors like fuel, housing, and transport, where inflation has either risen or stayed persistent. Fuel and light inflation, which had been negative until February, surged from 1.42% to 2.92%. Additionally, gold prices surged in April (30.8%), although this had little material impact on the overall inflation print. While the cooling in food inflation presents cautious optimism, non-food inflationary pressures suggest broader inflationary risks remain a challenge.

Despite the positive trend in food inflation, we expect food prices to hover around current levels for the next two months, as cost-side pressures and supply chain bottlenecks continue to affect prices. Meanwhile, non-food inflation will likely be driven mainly by higher gold prices, given the ongoing geopolitical tensions as well as concerns over the performance of the U.S., leading to more safe-haven buying. However, a pull-back in global energy prices and a firmer currency should help keep imported pressures in check. Given these dynamics, we expect the Reserve Bank of India to cut the repo rate by an additional 50 basis points cumulatively in the coming months.”

Table1: Overview of key sub-components of inflation 

Note:

1) CPI-Consolidated Fuel index includes Fuel & Light and Petrol & Diesel indices from the Miscellaneous basket

2) CPI-Core excludes Food & Beverages and Consolidated Fuel indices from Headline CPI

Chart 1: Food inflation’s descent continues to pull down headline CPI inflation, now at a 69-month low as of Apr-25