India’s Consumer Price Index (CPI) inflation eased to 3.16% YoY in April 2025 from 3.34% in the previous month. The decline in headline inflation was driven by a fall in food inflation to 2.1% YoY in April 2025 from 2.9% YoY in March 2025. Food inflation is no longer as broad-based, with 35% of food items witnessing greater than 6% inflation, down from 45% in December 2024.

Within food, a lower contribution from vegetables drove the decline in headline inflation. Vegetable inflation eased to -11.0% YoY in April 2025 from -7.0% YoY in March, on account of a 3.0% MoM correction in vegetable prices.

Core inflation (which excludes food and fuel) remained flat at 4.2% YoY. Underlying inflation pressures remained subdued, as indicated by a refined measure of core inflation (which additionally excluded transportation fuel and valuables), measuring 3.5% YoY in April 2025.

We expect inflation to align with the 4% target in FY26. The outlook for food inflation appears favourable as IMD forecasts an above normal monsoon at 105% of the long-period average. A benign inflation outlook and heightened growth risks strengthen the case for further monetary easing.

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