With Strong Harvests and Monsoon Forecast, India Poised for Continued Low Inflation

India's retail inflation in April 2025 hit its lowest point since July 2019, primarily driven by a significant and sustained decline in food inflation. The overall Consumer Price Index (CPI) eased to 3.16 percent, down from 3.34 percent in March, marking a positive shift towards price stability largely attributed to the cooling of food prices.

The food inflation rate witnessed a substantial reduction, falling from 2.7 percent in March 2025 to an even lower 1.8 percent in April 2025. This represents the most benign food inflation rate observed since November 2021, offering considerable relief to consumers nationwide.

This notable decline in food inflation is broadly based, stemming from decreased inflation across several essential food categories. Vegetables, pulses, cereals, and meat & fish, which collectively contribute more than half of the consumer food price index basket, all saw significant moderation in inflation, the monthly economic report of the finance ministry said.

Specifically, within food grains, the inflation rate for cereals has shown a positive downward trend, decreasing from 5.9 percent in March 2025 to 5.3 percent in April 2025. Government initiatives such as "Bharat Atta" and "Bharat Rice," coupled with open market sales of wheat and rice, have played a crucial role in keeping cereal prices in check.

Furthermore, pulses and vegetables continued to exhibit deflationary trends in April 2025, registering (-)5.2 percent and (-)11 percent, respectively. The moderation in pulse prices was supported by subsidised sales of pulses under the "Bharat" brand and a favourable harvest of kharif and rabi pulses, which is expected to increase by 3.8 percent in 2024-25 compared to the previous year.

Looking ahead, inflationary pressures stemming from food items, the report said, are expected to remain low due to a confluence of positive factors:

Good Rabi Harvest: As of May 9, 2025, an impressive 98.3% of the Rabi sown area had been harvested, with complete harvesting achieved for wheat, pulses, rapeseed and mustard, and most minor oilseeds. This robust output is expected to ensure an ample supply.

Increase in Summer Crop Sowing: The total area sown under summer crops stands at 78.8 lakh hectares (ha), marking a significant increase from 71.9 lakh ha in the previous year. Key gains came from summer rice (32.0 lakh ha, an increase of 3.44 lakh ha), pulses (22.7 lakh ha, an increase of 1.5 lakh ha), coarse cereals (14.6 lakh ha, an increase of 1.6 lakh ha), and oilseeds (9.5 lakh ha, an increase of 0.3 lakh ha) 

Healthy Buffer Stocks: As of May 12, 2025, wheat procurement under the Rabi Marketing Season (RMS) 2025-26 reached 291.7 lakh metric tonnes (LMT), up from 253.0 LMT in the previous year. Rice procurement under the Kharif Marketing Season (KMS) 2024-25 stood at 720.96 LMT, achieving approximately 85% of its target. The combined stock of rice and wheat has reached a comfortable 566.1 LMT, significantly exceeding the buffer norm of 210.4 LMT.

Above-Normal Monsoon Forecast: The India Meteorological Department (IMD) has forecast an early onset of the southwest monsoon with above-normal seasonal rainfall expected (105% of the long-period average). An above-normal and spatially well-distributed monsoon will play a crucial role in maintaining a benign food inflation outlook.

The inflation outlook remains optimistic, primarily driven by the sustained decline in food prices and supported by low core inflation and falling crude oil prices. Recent RBI surveys indicate a decline in inflation expectations, further reinforcing this positive sentiment, creating a monetary policy environment conducive to fostering economic growth.