India’s retail inflation cooled to a five-month low of 4.31% in January, from 5.22% in December 2024, and 5.1% a year ago. The rise in food prices has decelerated for the third successive month to 6%, from 8.4% in the preceding month, but the prices of edible oils and fruits has flared up sharply.
The price rise faced by urban consumers in January dropped to 3.87%, below the Central bank’s 4% median target for inflation, but remained above that threshold for rural consumers at 4.64%, down from December’s 5.8% rise.
The latest inflation figures were reported just days after the Reserve Bank of India (RBI) move to slash interest rates by 0.25 percentage points on the premise that inflation is declining and will soften to 4.2% in 2025-26 while growth needs are more pressing.
Rupee depreciation impact
The RBI has projected inflation to average 4.4% between January to March, which could imply mild spikes in the price rise pace over this month and the next. Economists have flagged worries about imported inflation as the rupee’s depreciation could weigh on the cost of items like edible oils, fertilizers, and petroleum.
Vegetables inflation more than halved to 11.3% in January from 26.6% in December, but fruits inflation spiked to 12.22%, and edible oils became 15.6% costlier than a year ago, marking a 33-month high.
“Over the past few months, edible oil has emerged as a major pressure point for food inflation, impacted by high global prices and import duties. Since around 60% of edible oil is imported, the weakening currency also adversely impacts its price,” noted Dharmakirti Joshi, chief economist at Crisil. Although non-food inflation inched up to a 13-month high of 3.2%, this was still within the comfort zone, he said.
Vegetables, eggs cheaper
The five items that recorded the highest inflation in January were coconut oil (54.2%), potatoes (49.6%), coconut (38.7%), garlic (30.7%), and peas (30.2%). Kerala and Odisha reported the highest inflation rates in the country at 6.76% and 6.05% respectively, while Delhi (2.02%) and Telangana (2.22%) recorded the mildest price pressures for their residents.
“The significant decline in headline inflation and food inflation during the month of January is mainly attributed to decline in inflation of vegetables, egg, pulses and products, cereals and products, education, clothing and health,” the National Statistics Office said.
Food inflation trends varied for urban and rural India, with cities reporting a 5.5% rise in prices, while rural areas still faced a higher inflation of 6.3%. On a month-on-month basis, the Consumer Price Index for January was 0.97% lower, while the Consumer Food Price Index had eased 2.9% from December.
Published – February 12, 2025 04:51 pm IST
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