India’s retail inflation, measured by the Consumer Price Index (CPI), is expected to moderate to 3.0% in May, a six-year low. This decline is attributed to a decrease in prices of cereals, pulses, and other food items, despite a strengthening of other segments. The CPI inflation rate fell to 3.16% in April from 3.34% in March, according to data released by the Ministry of Statistics and Programme Implementation. Core inflation, which excludes volatile food and energy prices, slightly increased to 4.18% due to a low base from last year. However, weak demand and stable commodity prices are expected to keep core inflation under control.
The report from Union Bank of India (UBI) highlights that inflation, excluding vegetables, remained steady at 4.11%, while inflation excluding gold is expected to stay low at 3.4%. The decline in overall inflation is a result of decreased prices of vegetables, pulses, fruits, meat and fish, personal care and effects, and cereals and products. The current inflation rate is within the Reserve Bank of India’s (RBI) manageable range of 2-6%. The RBI has expressed confidence that inflation will remain under control in the financial year 2025-26, following its April monetary policy review meeting.
The moderation in inflation is a positive sign for the Indian economy, as it brings retail inflation closer to the RBI’s target of 4%. Food prices, which were a concern for policymakers, have declined, contributing to the overall decrease in inflation. The stable inflation rate is expected to continue, with the RBI’s upper tolerance level of 6% not having been breached since October 2024. The current economic indicators suggest that India’s inflation is under control, giving confidence to economists and analysts. Overall, the decline in retail inflation is a positive development, indicating a stable and manageable economic environment.