In charts: Retail inflation eases again, but signs of price pressures are there
Summary
Retail inflation cooled further in April, driven by a broad-based easing in food prices, especially a sharp decline in vegetable costs. Mint explores what lies beyond the headline number.
Retail inflation fell to a nearly six-year low of 3.2% in April, down from 3.34% in March, paving the way for a widely anticipated rate cut by the central bank. But rising core inflation suggests caution ahead.
Diverging trends
Retail inflation declined for the sixth straight month, marking a sub-4% reading for the third month in a row, a trend that could bolster the case for a policy rate cut amid global growth concerns.
Yet, core inflation, which excludes food, fuel, and light, has risen in all but one month since June last year. It is currently above 4%. Health and education costs have also climbed, staying well above the medium-term target, suggesting persistent underlying price pressures.
Rising pressures
Despite a year-on-year decline, the Consumer Price Index (CPI) saw a 0.31% increase in April from the previous month, indicating that the seasonal easing seen during winter months is tapering off. This marks the first sequential uptick in six months, though the increase was milder than in April 2024 (0.48%) and April 2023 (0.51%). While CPI food declined for the sixth consecutive month, the drop was the smallest in April.
Gold rush
30.89%: That’s the inflation rate of gold in April. Amid the rising global uncertainty, gold prices have surged in recent months, albeit resulting in a slightly lower inflation than March’s 34.09%.
Read this | Gold, stocks and FPIs: What the market crystal ball foretells for the next three months
Gold has seen double-digit inflation for two straight years now, exacerbated in recent months, with investors increasingly turning to the precious metal to hedge against market volatility amid tariff-led uncertainty and stock market volatility. While inflation for gold has eased on a year-on-year basis, it has risen 6.2% on a month-on-month basis.
Group-wise inflation
Inflation trends in April showed varied movements across broad groups.
While food and beverages recorded a continued easing, the miscellaneous category breached the 5% mark, which included the impact of double-digit gold inflation.
Most notable was the sharp increase in inflation in the fuel and light group to 2.92% in April from 1.42% the previous month. This was mainly due to a 4.24% inflation in liquefied petroleum gas (LPG) due to price hikes, as against a deflation of 2.4% in the previous month.
Sticking out
With easing inflation, the number of items in the inflation basket witnessing high inflation has also come down. However, a significant share of these items continues to see high inflation.
A Mint analysis of item-wise data shows that one in four items recorded over 5% inflation. More worryingly, nearly 10% of the inflation basket recorded double-digit inflation, led by coconut and products, gold, silver, refined oil, coffee powder, and some fruits, among others. High inflation in these items may make common people feel the price pinch.
Coconut’s climb
67.59%: That’s the inflation rate for coconut oil in April 2025, the highest among all 289 items in the CPI basket for which the data were released.
After staying in deflation throughout 2022 and 2023, prices began to surge from February 2024, jumping from 2.44% to 15.72% by August 2024 and crossing 50% by January 2025. The spike is driven by climate-related disruptions affecting coconut production, with copra, the primary raw material for coconut oil, now recording over 30% inflation.
Food's comfort
Food prices, which account for nearly 40% of the inflation basket, have been the main factor behind the overall easing in inflation.
Food inflation fell to 1.78% in April from 2.69% in March, the lowest since November 2021, driven by sharp deflation in vegetables (-10.98%) and pulses (-5.2%). Moderation in cereal prices also contributed to the decline.
However, the outlook for food inflation remains uncertain, as major retailers raised milk prices starting in May.
Vegetable effect
Vegetable prices often have an outsized impact on headline inflation, dragging it down when they fall and pushing it up when they rise. Currently, they’re exerting significant downward pressure.
Also read | Rural India's reality check: Consumers turn cautious as aspiration meets inflation
A Mint analysis shows that without vegetables, April’s inflation would have been 4.1%. Vegetables have been pulling down inflation since February, but with summer typically driving up prices, the trend could reverse in the coming months
