India’s annual retail inflation rate eased in March to a five-month low helped by a drop in fuel prices, government data showed on Friday, but economists say a rate cut by the central bank is still some months away as food prices remain sticky.

Annual retail inflation in March was 4.85%, lower than 5.09% in February, and below the 4.91% forecast by a Reuters poll of 50 economists.

Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.52% in March, compared with a 8.66% rise in February. Fuel prices fell 3.2% year-on-year, compared with a 0.77% fall in February.

Indian state fuel retailers last month cut petrol and diesel prices, the first change in about two years.

Vegetable prices rose 28.3% on year, while prices of pulses increased nearly 17.7%, eggs were up 10.3% year-on-year.

Core inflation, which strips out food and energy prices, was estimated to be stable at 3.3%-3.4% in March, as compared with 3.3%-3.37% in February, according to two economists. The Indian government does not release core inflation figures.

Volatile food prices have been a key challenge for the government and the central bank, which kept its interest rates unchanged for the seventh consecutive meeting last week and has said it will focus on bringing inflation down to 4%.

An impending heatwave may worsen the seasonal uptick in prices of perishables, heightening the significance of a favourable monsoon in 2024 to keep food inflation in check, ICRA economist Aditi Nayar said.

Lower retail inflation could help Prime Minister Narendra Modi during two months of national polls starting from April 19, in which he is seeking a third consecutive term. To contain food prices Modi’s government has kept a ban on exports of wheat, rice and onions.

“At best, we foresee 50 bps of rate cuts from the monetary policy committee in second half of 2024/25,” Nayar said. India’s 2024/25 fiscal year started from April 1.

IDFC First Bank economist Gaura Sengupta said: “We expect the RBI rate cut cycle to start from August at the earliest.

“This is contingent on the Fed rate cut cycle starting from June/July. In case the Fed rate cut cycle gets delayed due to adverse US inflation prints, the RBI rate cut cycle could get delayed.” India’s economic growth of 8.4% in the December quarter gives the central bank more time to focus bringing down inflation to 4% on a sustainable basis, economists said.

The inflation print has been largely in line with market expectations and is unlikely to be a big moving factor in central bank’s reaction function, said Madhavi Arora, an economist at Emkay Global.

Meanwhile, India’s fuel consumption fell 0.6% year-on-year in March, but demand for the 2024 financial year was up about 5%, primarily driven by higher automotive fuel and naphtha sales.

Total consumption, a proxy for oil demand, totalled 21.09 million metric tons (4.99 million barrels per day) in March, down from 21.22 million tons (5.02 mbpd) last year, preliminary data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed on Saturday.

However, fuel demand for the 2024 financial year, ending in March, hit a record high of 233.276 million tons (4.67 mbpd) compared to 223.021 million tons (4.48 mbpd) a year earlier. Sales of diesel, mainly used by trucks and commercially run passenger vehicles, rose 3.1% year-on-year to 8.04 million tons in March and was up 4.4% for the previous fiscal year. Sales of gasoline in March rose 6.9% year-on-year to 3.32 million tons and were up 6.4% for the fiscal year.

According to RBI latest data, India’s foreign exchange reserves went up by $2.98 billion during the week ended April 5 to scale a new all-time high of $648.562 billion.

This is the seventh consecutive week marking a jump in the overall reserves. The forex kitty had increased by $2.95 billion during the preceding week ended March 29, after notching a cumulative $26.5 billion rise in the previous five weeks.

Gold reserves, which also form part of the forex kitty held by the RBI, shot up by $2.398 billion to $54.558 billion during the latest week, while foreign currency assets increased by $549 million.

The Special Drawing Rights (SDRs) were up by $24 million to $18.17 billion.

RBI Governor Shaktikanta Das referred to the record foreign exchange reserves as a reflection of the strength of the Indian economy.

“It is our prime focus to build a strong umbrella, a strong buffer in the form of a substantial quantum of forex reserves which will help us when the cycle turns, or when it rains heavily,” Das said while unveiling the first monetary policy review of the current financial year that began on April 1.