May 12, 2025
Urban food inflation stood at 1.64%, slightly lower than rural areas at 1.85%, according to NSO data
Fuel inflation climbed for a second month to 2.92%, the highest level since August 2023
Core inflation rose marginally to around 4.1%, with services like education and transport also witnessing an uptick
Retail inflation excluding vegetables and pulses touched an 18-month high of 4.4% in April
India’s retail inflation continued to moderate in April, easing to 3.16% from 3.34% in March, as a steep decline in vegetable and pulses prices brought welcome relief. This marks the softest rise in the Consumer Price Index (CPI) since July 2019, when inflation was recorded at 3.15%. It offers the Reserve Bank of India’s Monetary Policy Committee (MPC) additional space to pivot towards growth in its upcoming policy meeting starting June 4.
According to data released by the National Statistics Office (NSO), inflation in rural areas stood at 2.92% while urban inflation was marginally higher at 3.36%. Food inflation remained subdued, particularly in urban areas where it fell to 1.64%, compared to 1.85% in rural India.
Economists have flagged rising edible oil prices as a concern, with CareEdge Ratings noting that a contraction in oilseed sowing, global price trends, and India’s dependency on imports could pose risks ahead.
Fuel inflation increased to 2.92%, marking the second straight month of an upward trend and reaching its highest point since August 2023. Price pressures also intensified in services like transport (3.73%), recreation (2.51%), and education (4.13%). Core inflation, which excludes food and fuel, edged up to around 4.1%—its highest level since November 2023.
Analysts at India Ratings and Research observed that when vegetables and pulses are excluded, retail inflation surged to an 18-month high of 4.4% in April 2025, suggesting lingering inflationary pressures beyond food essentials.
A state-wise breakdown revealed wide disparities: Goa led the inflation chart with 6.95%, followed by Kerala at 5.94%, while Telangana recorded the lowest at just 1.26%. Among union territories, Delhi reported the lowest inflation rate of 1.77%, while Lakshadweep faced the highest at 6.8%. A total of 18 states and UTs registered inflation rates above the national average.
Although economists expect a temporary rise in food prices due to the heatwave in May, they anticipate overall inflation remaining manageable, giving the RBI space to consider further rate cuts. The central bank has already slashed the repo rate by 50 basis points across its last two policy reviews.
However, Bank of Baroda’s chief economist cautioned that the current decline in inflation is primarily driven by vegetables, which hold a 6% weight in the CPI basket. Excluding this category, inflation hovers around the RBI’s target range of 4% ± 2%. He suggested the central bank may delay immediate rate cuts to assess monsoon conditions and tariff developments, with a more decisive move expected in August.
Growth concerns may influence the RBI’s pace of monetary easing. ICRA’s chief economist projected a 25 basis points cut in June, with similar reductions likely in August and October. However, this forecast may shift based on GDP growth estimates for Q4 FY2025, set to be released on May 30. Should the numbers fail to improve upon the previous quarter’s 6.2% growth, the MPC may opt for a more aggressive 50 basis points rate cut in its June review.
Source: Business Standard