The ongoing global tariff wars and the continued rise in gold prices will significantly impact the overall consumer price index (CPI) in the upcoming months, even if food prices remain stable, according to a report by the Union Bank of India (UBI).
The report added that higher CPI, which is a measure of inflation, could occur even if food prices remain stable, as the cost of non-food essentials, particularly precious metals, plays an increasingly significant role in driving overall inflation.
As per the inflation data released by the Ministry of Statistics and Programme Implementation on Tuesday, retail inflation in India in April fell to 3.16% from 3.34% in March. The April CPI slips to six-year lows as the decline in inflation is attributed to a decrease in prices of vegetables, pulses and products, fruits, meat and fish, personal care and effects and cereals and products.
Effectively, overall inflation declined 18 basis points in April 2025 compared to the same period last year. According to the data, core inflation has remained almost flat at 4.09% in April, while core inflation excluding gold has also stayed unchanged at 3.3%.
CPI Amid Rising Gold Prices And Global Tariff Tensions
Core CPI ex-transport, post-recording a spike in March (4.26%) has again softened to 4.18%. Within the core inflation category, personal care inflation has moderated from 13.50% in March to 12.90%. Core inflation is defined as a measure of inflation that removes volatile, short-term price changes in key categories, primarily food and energy, in order to portray a more steady, long-term trend in price increases.
Going further, the UBI sees another 50 basis points repo rate cut divided between June and August. “With FY25 CPI at 3.7% and April 25 CPI also well below 4% at 3.16%, we maintain our call of another bps repo rate cut divided between June and August,” the report adds.
The inflation level gives confidence to economists and analysts, as current inflation rates are within the Reserve Bank of India’s (RBI) manageable range of 2-6%. Retail inflation last breached the Reserve Bank of India’s 6% upper tolerance level in October 2024. Since then, it has been in the 2-6% range, which the RBI considers manageable.
Food prices were a concern for Indian policymakers, who wished to sustain retail inflation around 4%. After the RBI’s April monetary policy review meeting, the central bank said that inflation is expected to remain under control in the financial year 2025-26.
Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory well. The RBI held its benchmark repo rate steady at 6.5% for the eleventh consecutive time before cutting it for the first time in about five years in February 2025.
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