People buying vegetables at a local market in Noida, Uttar Pradesh on August 22, 2023. (Photo by Chandradeep Kumar/ The India Today Group via Getty Images)
The India Today Group | The India Today Group | Getty Images
India’s consumer inflation eased to a cooler-than-expected 2.82% in May, the country’s Ministry of Statistics and Programme Implementation reported Thursday.
The year-on-year headline inflation came in below a Reuters’ median poll estimate of a 3% increase. It had risen by 3.16% in April.
Food inflation, a key inflation metric, hit 0.99% in May, sharply below the 1.78% of April.
late cut, slashing the benchmark repo rate by 50 basis points to 5.50%, a level unseen since August 2022.
The move, spurred by easing inflation, underscores policymakers’ shift toward more aggressive monetary easing to bolster economic growth. The RBI has cut interest rates for three consecutive meetings since February.
RBI Governor Sanjay Malhotra attributed the latest cut to softening inflation, and growth that has been “lower than our aspirations amidst a challenging global environment and heightened uncertainty.”
Nomura economists peg India’s headline CPI at a “subdued 3.3%” for the fiscal year 2026, undershooting the RBI’s 3.7% target, citing softened commodity prices amid weakened economic activity and an influx of cheap Chinese goods into the market.
The investment bank expects two additional cuts of 25 basis points in October and December, taking the terminal rate to 5%.
India’s economy expanded at a faster-than-expected annual rate of 7.4% in the quarter ended March, higher than the 6.7% growth estimates by economists in a Reuters poll.
For the full fiscal year 2025, the economy expanded by 6.5%, in line with the government estimates. The RBI has maintained its growth projection for the current fiscal year, ending in March 2026, at 6.5%.
Facing a potential 26% tariff on its goods, India has been in talks with the U.S., aiming to secure a deal before the July deadline.
Indian and U.S. trade negotiators were close to signing an “interim” bilateral trade deal, Reuters reported earlier this week. The initial agreement will likely center around market access for industrial and some agricultural goods, lower tariffs and other non-tariff barriers, according to Reuters.
Subscribe now
