India CPI Inflation Rate: Data, Forecast & Trends

The latest provisional data for April 2025 indicates a remarkable decline in India's year-on-year (YoY) headline inflation, as measured by the All India Consumer Price Index (CPI), to 3.16%. This marks an 18-basis-point (bps) reduction from the March 2025 figure of 3.34% and a substantial drop from 4.83% in April 2024. Notably, this is the lowest year-on-year inflation rate observed since July 2019, signifying a sustained disinflationary trend.

The rural inflation rate in April 2025 stood at 2.92%, down from 3.25% in March 2025. Urban inflation also eased, moving from 3.43% in March 2025 to 3.36% in April 2025. This general easing across both rural and urban areas underscores a broad-based disinflationary impulse.

The primary driver of the latest disinflation has been the significant cooling of food prices. The Consumer Food Price Index (CFPI) based food inflation for April 2025 plummeted to a provisional 1.78% YoY, a sharp decline of 91 basis points from 2.69% in March 2025. This represents the lowest food inflation since October 2021.

Breaking down the food basket:

• Vegetables and Pulses & Products experienced substantial disinflation, with a notable decline in their prices. This is a crucial development given their significant weight in the CPI basket (food articles alone contribute around 45.9% to the CPI). For instance, vegetable prices experienced a year-on-year fall of 10.98% in April 2025, while prices of pulses and related products also saw a decline.
• Cereals and Products, Meat and Fish, and Personal Care and Effects also contributed to the overall moderation in food inflation.
• Conversely, some food items continued to show upward pressure. Fruits inflation, for instance, rose by 13.8% YoY in April 2025, and Oils and Fats registered a significant surge of 17.4%.

Beyond food, other key components exhibited mixed trends:

• Housing inflation (compiled for urban areas only) remained relatively stable at 3.00% in April 2025, a marginal decrease from 3.03% in March 2025.
• Education inflation saw an uptick, rising to 4.13% in April 2025 from 3.98% in March 2025.
• Health inflation stayed largely unchanged at 4.25% in April 2025, compared to 4.26% in the preceding month.
• Transport & Communication inflation increased to 3.73% in April 2025 from 3.36% in March 2025.
• Fuel & Light inflation registered a sharp increase to 2.92% in April 2025, significantly higher than 1.42% in March 2025.

On a month-on-month (MoM) basis, the combined CPI index for April 2025 rose by 0.31%. This represents a rebound from the 0.26% drop observed in March 2025, halting five consecutive months of declines in the CPI.

The MoM movements within components reveal:

• The food index, contrary to the overall CPI, registered a decline of 0.15% MoM in April 2025. This indicates a monthly fall in prices for essential food items.
• Specifically, cereals and products saw a MoM decline of 0.65% in combined inflation.
• Meat and fish prices increased by 1.80% MoM.
• Fruits saw a significant MoM increase of 4.09%.
• Fuel & light MoM experienced a notable decline of 2.82% at the wholesale level.
• At the wholesale level, the overall Wholesale Price Index (WPI) for April 2025 saw a monthly change of -0.19% as compared to March 2025, marking the sixth straight monthly drop.

India's average retail inflation, as measured by the Consumer Price Index (CPI), showed a moderating trend in 2024, averaging slightly below 5%. While this represented a decrease from the higher figures seen in 2023, it remained above the Reserve Bank of India's (RBI) target of 4%, albeit within the 2-6% tolerance band. The persistent inflationary pressures were largely attributed to volatile food prices, particularly vegetables and pulses, which experienced supply-side disruptions and seasonal fluctuations.

India's inflation history over the past three decades has been characterized by periods of volatility, largely influenced by global commodity prices, domestic supply shocks (especially agricultural), and monetary policy responses.

In the 1990s, inflation experienced notable fluctuations. For instance, in 1998 inflation experienced a peak of 19.7% in November, largely due to supply-side issues in agriculture.

The 2000s generally saw inflation remain in the mid-single digits, although surges were observed. The latter half of the decade witnessed a global commodity boom, pushing India's inflation higher.

The 2010s were marked by the Reserve Bank of India (RBI) increasingly adopting an inflation-targeting framework. This led to a concerted effort to bring down inflation from the high single-digit and low double-digit figures seen in the early part of the decade. By 2014, with the formalization of inflation targeting, the average CPI inflation began to trend downwards.

The early 2020s presented new challenges. The COVID-19 pandemic and subsequent supply chain disruptions, coupled with global geopolitical events like the Russia-Ukraine conflict, fueled inflationary pressures: India's annual inflation rate in 2020 and 2022 was over 6%.

Headline inflation refers to the total inflation in an economy, encompassing all categories of goods and services in the consumer price index. In India, this is primarily measured by the Consumer Price Index (CPI). Core inflation, on the other hand, excludes volatile components like food and fuel prices. This exclusion aims to provide a clearer picture of underlying inflationary pressures that are less susceptible to transient supply shocks or seasonal variations.

In the Indian context, the distinction between headline and core inflation is particularly significant given the substantial weight of food in the CPI basket (slightly less than half). Food price volatility, often driven by monsoon patterns, global food supply, and local procurement issues, can frequently distort the headline inflation number, making it a less reliable indicator of persistent price trends.

The Reserve Bank of India (RBI) largely targets headline CPI, but it closely monitors core inflation as a gauge of the demand-side pressures and the effectiveness of its monetary policy actions. A sustained high core inflation would signal that demand is robust and potentially overheating, necessitating tighter monetary policy, even if temporary food price deflation pulls down headline inflation.

Despite the recent moderation in headline inflation, several risks could influence India's inflation trajectory in the coming months and years:

• Food Price Volatility: While recent disinflation in food is welcome, India's agricultural sector remains highly susceptible to monsoon variations. An erratic or deficient monsoon can quickly reverse the current benign food inflation trend, given the sector's dependence on rainfall and its large share in the CPI basket. Geopolitical events impacting global food and fertilizer supplies also pose a risk. The prospects of a bumper rabi harvest and an above-normal monsoon forecast for 2025 offer some optimism, but weather-related uncertainties are ever-present.
• Global Commodity Prices: Fluctuations in international crude oil prices remain a significant determinant of India's inflation. As a net importer of crude oil, any sustained surge in global oil benchmarks due to geopolitical tensions (e.g., in the Middle East) or supply constraints can directly translate into higher domestic fuel and transportation costs, feeding into headline inflation. Similarly, prices of other imported commodities, especially industrial metals and edible oils, can impact inflation through imported inflation channels.
• Fiscal Policy and Demand-Side Pressures: While the current focus is on supply-side disinflation, a robust recovery in domestic demand, driven by government expenditure and private consumption, could eventually put upward pressure on prices. The government's fiscal stance and any populist measures in the run-up to elections could also inject liquidity into the economy, contributing to demand-pull inflation. The improvement in urban consumption, supported by income tax cuts and job growth outlook, combined with robust rural demand, could lead to a more broad-based consumption recovery.
• Exchange Rate Volatility: The Indian Rupee's depreciation against major currencies, particularly the US Dollar, can make imports more expensive, leading to imported inflation. Sustained foreign portfolio investor (FPI) outflows could exert downward pressure on the rupee, posing a risk. The RBI's intervention in the forex market is crucial to manage this risk.
• Global Trade Dynamics and Supply Chains: Geopolitical tensions and trade protectionism continue to disrupt global supply chains. While India is increasingly positioned as a "connector country" in global trade, any significant realignment or restrictions could impact the availability and pricing of goods, potentially leading to inflationary pressures.
• Wage-Price Spiral: While not a dominant concern currently, strong wage growth, particularly in the organized sector, if not matched by productivity gains, could eventually feed into higher prices as businesses pass on increased labor costs to consumers.

India Inflation Data