Retail inflation is expected to remain well within the Reserve Bank of India’s comfort zone, as members of the Monetary Policy Committee (MPC) cited favourable developments in food and fuel prices, alongside improving inflation expectations, in the minutes of the April meeting released on April 23.
The Consumer Price Index (CPI) inflation fell sharply to 3.6% in February 2025 from 5.2% in December 2024, driven by a seasonal drop in vegetable prices and sustained deflation in fuel. The RBI now projects CPI inflation for FY26 at 4%, with quarterly estimates ranging from 3.6% to 4.4%.
RBI Deputy Governor M Rajeshwar Rao described the inflation path as “benign,” supported by a broad-based fall in food prices. Early April data, he said, shows continued softness, especially in key food sub-groups.
Governor Sanjay Malhotra pointed to improved clarity in the food inflation outlook, with uncertainties over rabi crop production now abated. “The second advance estimates suggest record wheat production and higher production of key pulses,” the minutes noted.
He added, “Favourable factors for the inflation outlook outweigh those with possible adverse impact and should drive further disinflation in the headline CPI.”
Core inflation, excluding food and fuel, rose slightly to 4.1% in February from 3.6% in January, largely due to gold prices. However, it remains close to the RBI’s target, suggesting underlying inflationary impulses are stable and well anchored.
RBI Executive Director Rajiv Ranjan said the disinflationary trend was gaining traction, with inflation expectations among households and businesses showing a marked decline. This, he added, gives policy space to support growth.
External member Saugata Bhattacharya pointed to softer industrial metals and energy prices globally, noting that the International Energy Agency expects global oil supply to outpace demand in 2025. He said this would add to the disinflationary bias.
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Bhattacharya also noted that ongoing trade disruptions could result in dumping of cheaper goods into India, which, while challenging for domestic industry, may contribute to lowering input costs and easing price pressures.
Professor Ram Singh agreed that inflation is expected to remain within the RBI’s 2-6% tolerance band, helped by improved agricultural output, a normal monsoon forecast, and stable core inflation trends.
Together, these views reflect a strong consensus within the MPC that inflation will likely remain subdued through the year, allowing monetary policy to focus more clearly on nurturing growth.