For the past year, global headwinds, rate hikes by the US Federal Reserve and most importantly the need to control had forced the Reserve Bank of India to hike interest rates. Even though the RBI kept the rate hikes lower as compared to the global trend, they made borrowing costlier and inflation still remained above the RBI's tolerance level of 6 per cent for most months.
Now the central bank can breathe a sigh of relief, as retail inflation in India has dropped to its lowest levels in 18 months at 4.7 per cent for April.
Easing pressure on RBI
This also marks the second straight month when inflation has stayed below the RBI's threshold, allowing it room to pause repo rate hikes in the near future.
While retail inflation went down from 5.66 per cent to 4.7 per cent, the dip was influenced by food inflation which dropped to 3.8 per cent for the month of April.
Since the cost of food plays a major role in Indian household expenses, it has 54 per cent weightage while calculating the overall rate of inflation.
Although milk prices and the cost of pulses continued to rise, falling vegetable prices helped ease inflation.
