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regular-article-logo Wednesday, 19 March 2025

Retail inflation at five-month low of 4.31 per cent in January amid lower food prices

The fall in inflation reinforces the rate cut of 25 basis points last week by the Reserve Bank of India, which has the mandate to keep inflation in 2-6 per cent range

Our Special Correspondent Published 13.02.25, 08:34 AM
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Retail inflation tumbled to a five-month low at 4.31 per cent in January, down from 5.22 per cent in December, driven by lower prices of vegetables, eggs and pulses, according to government data released on Monday.

The fall in inflation reinforces the rate cut of 25 basis points last week by the Reserve Bank of India, which has the mandate to keep inflation in 2-6 per cent range.

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Consumer price index (CPI)-based inflation is on a downward trajectory since October. The previous low was 3.65 per cent in August.

Food inflation, a key driver of overall prices, fell to 6.02 per cent in January from 8.65 per cent in December, marking its lowest level in five months.

According to the data, the top five items in inflation were coconut oil (54.2 per cent), potato (49.61 per cent), coconut (38.71 per cent), garlic (30.65 per cent) and peas (30.17 per cent).

The bottom five were jeera (-32.25 per cent), ginger (-30.92 per cent), dry chillies (-11.27 per cent), brinjal (-9.94 per cent) and LPG (excluding conveyance) (-9.29 per cent).

Economists expect further rate cuts if inflation falls.

“CPI inflation fell sharper than expected, reinforcing the RBI’s recent rate cut. We see room for another 25 bps cut
in April or June, depending
on global developments and currency movements,” said Aditi Nayar, chief economist at Icra.

Dipanwita Mazumdar, economist at Bank of Baroda, attributed the easing of food inflation to seasonal factors and improved supply dynamics.

“High-frequency data for February suggests continued softening, especially for tomatoes and potatoes. Core inflation remains contained, offering further comfort for monetary policy,” she added.

Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, held similar views. She said inflation is likely to remain moderate, providing room for another rate cut.

She cautioned that currency movements need close monitoring for potential spillover effects on inflation.

IIP dips to 3.2%

Industrial production growth slowed to a three-month low of 3.2 per cent in December, weighed down by sluggish performance in the mining and manufacturing sectors, government data showed on Wednesday.

The slowdown raises concerns about the pace of economic recovery.

The manufacturing sector, which accounts for nearly 77 per cent of IIP, grew 3 per cent in December, down from 4.6 per cent a year earlier.

Mining output growth slowed to 2.6 per cent from 5.2 per cent in December 2023, while electricity generation rose sharply by 6.2 per cent, up from 1.2 per cent a year ago.

For the April-December 2024 period, industrial output grew 4 per cent, significantly lower than the 6.3 per cent expansion recorded in the same period last year.

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