CURRENT AFFAIRS
CURRENT AFFAIRS
Description
India’s retail inflation rate has dropped to its lowest level in more than six years, driven largely by falling food prices. According to the Consumer Price Index (CPI), inflation eased to 3.16% in April 2025, and economists expect it to decline further to around 2.7% in May. This marks the first time since April 2019 that the CPI has dipped below the 3% mark.
Recent Trends In Inflation
The country has witnessed a steady decline in retail inflation for seven straight months. The current easing is mostly due to reduced prices in key food categories such as cereals and pulses. However, some vegetables, including potatoes and tomatoes, have seen price hikes, slightly offsetting the overall downward pressure.
Core Inflation On Rise
While headline inflation has slowed, core inflation which excludes food and fuel has shown a gradual uptick, reaching approximately 4.2%. Since mid-2024, core inflation has risen from 3.1%, indicating some underlying demand pressures. Experts caution that global commodity trends and sluggish domestic growth may continue to influence core inflation.
Food Price Movement
The moderation in food inflation is credited to a good winter harvest and higher availability of pulses. Still, prices of certain vegetables have risen in May, with tomatoes climbing nearly 10% and potatoes by 3%. These increases suggest that essential food items may remain volatile and require close observation.
RBI's Response And Monetary Policy Outlook
The Reserve Bank of India has revised its inflation forecast, expecting an average of 2.9% CPI inflation for Q1 FY26 (April–June 2025). Encouraged by this favorable trend, the RBI has already slashed interest rates by 100 basis points in 2025. However, with inflation expected to remain subdued, the central bank has adopted a 'neutral' stance, hinting at limited room for further monetary easing.
Projections For Rest Of Year
Looking ahead, inflation is anticipated to rise moderately to 4.4% by the end of the financial year. Factors such as monsoon variability, supply chain issues, and a rebound in food prices may contribute to this projected increase. The RBI’s Monetary Policy Committee has adopted a cautious tone, reflecting its intent to manage inflation risks while supporting growth.
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