Will April Inflation Data Clear the Path for a June Rate Cut?

India’s retail inflation eased to a 69-month low of 3.16% in April 2025, according to official data released on May 13. This marks the 3rd straight month that inflation has remained below the Reserve Bank of India’s (RBI) medium-term target of 4%, raising expectations of further monetary easing in the upcoming policy review.

Why Are Food Prices Falling in April 2025?

The headline inflation figure was primarily driven by a sharp moderation in food prices. Food and beverage inflation, which accounts for nearly 46% of the Consumer Price Index (CPI), fell to 1.78% in April, its lowest level in 41 months. Key categories such as vegetables, pulses, cereals, and meat & fish recorded deflation, while prices of fruits and edible oils rose in double digits.

This moderation occurred despite ongoing heat waves, aided by the arrival of the rabi harvest and healthy reservoir levels. These factors played a key role in easing household budget pressures across both rural and urban regions.

What Is Core Inflation and Why Is It Rising?

While headline inflation slowed, core inflation, which excludes food and fuel, rose to 4.2% in April, the highest since November 2023. This indicates steady domestic demand pressures. Inflation remained elevated in categories like personal care (12.9%), health (4.25%), education (4.13%), and housing (3%).

Inflation in clothing and footwear stood at 2.67%, while fuel and light saw a rate of 2.92%. Overall, the inflation mix suggests resilience in discretionary spending, even as food-driven disinflation persists.

Rural vs Urban Inflation in April 2025: What's the Difference?

In rural areas, headline CPI inflation was recorded at 2.92%, with food inflation at 1.85%. In contrast, urban inflation came in slightly higher at 3.36%, while food inflation was lower at 1.64%.

Month-on-month, the overall CPI index rose 0.31%, while the consumer food price index dipped by 0.15%, reflecting stable prices for essential commodities.

RBI Rate Cut in June 2025: What Does April Inflation Signal?

The RBI had reduced the repo rate by 25 basis points to 6% in April, marking its second consecutive cut. Now, with April’s inflation figure reinforcing a reduction in Inflation, the central bank continues to keep it’s “accommodative” stance.

While inflation forecasts for FY26 have been revised to 4% by the RBI, rising imported inflation—driven by precious metals and energy—along with rupee depreciation, could complicate policy decisions in the months ahead.

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