Disinflation path clouded by geopolitical, trade, weather volatility: RBI

CPI inflation dropped to 3.16% in April 2025, its lowest since July 2019, but the RBI warns of uncertainties from global conflicts, trade shifts and weather conditions

The disinflationary process remains uncertain due to ongoing geopolitical conflicts, shifting trade dynamics and unpredictable weather conditions, all of which call for sustained vigilance and close monitoring of emerging developments, according to the Reserve Bank of India’s (RBI’s) annual report for 2024–25. 

 

‘The disinflationary process, however, is subject to uncertainties emanating from prolonged geopolitical conflicts, evolving trade dynamics and weather conditions, which warrant continuous vigil and careful monitoring of the evolving dynamics,’ the report said.

 

India’s Consumer Price Index (CPI) inflation experienced a notable decline in 2024–25. It eased from 4.8 per cent in April–May 2024 to a low of 3.6 per cent in July, before rising to 6.2 per cent in October. This moderation was driven by robust agricultural production, softening global commodity prices—especially in food and energy—easing supply chain pressures, government supply management measures and the lagged effects of monetary policy actions. 

 

Food inflation, which had remained elevated due to weather-induced supply disturbances, corrected in January–March 2025 as higher market arrivals improved supply. Fuel prices remained in deflation during 2024–25, attributed to lower prices of liquefied petroleum gas (LPG) and kerosene. Core inflation softened to its lowest in the current series during the early part of the year, followed by a benign uptick in subsequent months.

 

‘Headline inflation moderated in 2024–25 on account of robust agricultural crop production, softening global commodity prices—particularly food and energy—easing supply chain pressures, supply management measures undertaken by the government and lagged impact of monetary policy actions. Food inflation, which remained elevated on recurrent weather-induced supply disturbances, corrected in January–March 2025 on higher market arrivals,’ the report said. 

 

Looking ahead, food inflation is expected to soften further, supported by a better rabi crop, leading to a gradual moderation in headline inflation.

 

India’s retail inflation eased further in April 2025, with the year-on-year Consumer Price Index (CPI) declining to 3.16 per cent—its lowest level since July 2019. This marked a continued disinflationary trend, with inflation softening by 0.18 percentage points from 3.34 per cent in March.

 

CPI inflation has now remained below the Reserve Bank of India’s medium-term target of 4 per cent for the third consecutive month, reflecting sustained moderation in price pressures across key components.