India’s retail inflation is widely expected to have fallen below five per cent in April, thereby boosting optimism that the tightening cycle from the Reserve Bank of India (RBI) is over.

The Centre will release the April inflation data tomorrow.

While a Reuters poll of 53 economists pegged the consumer price index-based inflation at 4.8 per cent in April from 5.66 per cent in March, a Bloomberg poll of 36 economists estimated it at 4.76 per cent, an 18 month low. If these expectations hold, it will be the second straight month that inflation has come within the central bank’s target of 4 per cent with a band of +/-2 per cent on either side.

This moderation in inflation is likely to be on the back of high base and decline in food inflation due to lower prices of items like cereals and edible oil.

At its April meeting, the monetary policy committee (MPC) of the RBI had surprisingly retained the policy repo rate at 6.50 per cent thereby going against broad expectations of a 25 basis point increase. Due to the decline in inflation and economists expectations that it is unlikely to breach the upper bound, the central bank is widely projected to be on an extended pause and resort to a cut later in this year or early next year.

The MPC has projected that core inflation which so far remained sticky would remain elevated. Assuming an annual average crude oil price (Indian basket) of $ 85 per barrel and a normal monsoon, it has estimated CPI inflation at 5.2 per cent for 2023-24, with the headline number coming at 5.1 per cent, 5.4 per cent in the second quarter followed by 5.4 per cent and 5.2 per cent in the subsequent two quarters respectively.

According to Madhavi Arora, lead economist at Emkay Global Financial Services, India will likely witness a sub-5 per cent inflation early this year, with an average rate of CPI at 5.2 per cent for the calendar year.

“The global economy is witnessing a phase of a non-linear disinflation path. The debate on the path to disinflation is now more about how quickly it decelerates and how that pace of deceleration shapes the Fed’s pivot,’’ she said in a recent interaction with the media.