Retail inflation fell to a 69-month low in April due to a continuous reduction in food prices, raising confidence that the Reserve Bank of India will continue to decrease interest rates for the foreseeable future.

Retail inflation, as determined by the consumer price index (CPI), decreased from 3.3% in March to 3.2% in April, the lowest level since July 2019, according to data provided by the National Statistics Office (NSO) on Tuesday. Inflation was 2.9% in rural areas and 3.4% in urban areas. The retail inflation rate has fallen short of the central bank's 4% objective for the third consecutive month.

Inflation for food was 1.8% in April, compared to 2.7% in March. April was the lowest level of food inflation since October 2021. Inflation of vegetables, pulses and products, fruits, meat and fish, and cereals and products were the main drivers of the April decrease in both total and food inflation. In April, vegetable inflation decreased by over 11%, but pulse and product inflation decreased by 5.2%. With double-digit inflation rates for fruits and oil and fats in April, there were still two pressure areas.

Given the headroom created by the significant slowdown in price pressures, many anticipate that the RBI will lower rates when it convenes to discuss monetary policy in June. According to Aditi Nayar, chief economist at ratings agency ICRA, they expect CPI inflation to average 3.5% in FY26, with Q2 and Q3 readings significantly below the MPC's forecasts for these quarters. This allows for an extra 75 basis points of rate decreases during the year.