April's low retail and wholesale inflation provides relief to both the public and policymakers.
For the public, it signals that price increases are easing.
For policymakers, it shows that last year's high inflation is under control, supporting the RBI's rate cuts.
The fall in retail inflation was mainly due to an 11% drop in vegetable prices and a 5.2% drop in pulses.
The vegetable price drop is partly due to last year’s high inflation, making current prices look lower in comparison.
Wholesale inflation also decreased due to lower vegetable prices, which fell 18.26%.
Government actions like boosting food stocks and easing imports helped lower inflation.
A liquidity crunch in banks earlier this year might have also contributed to lower inflation by reducing available money.
Future inflation will depend on the monsoon and potential tariff issues.
The low inflation could lead to further RBI rate cuts and may push oil companies to reduce fuel prices in line with lower crude oil prices.
If fuel prices don't drop, the government may need to abandon its dynamic pricing policy, as oil prices have fallen 42% without changes in domestic prices.
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