India's Retail Inflation Falls To Five-Month Low Of 4.31 Per Cent In January

India’s retail inflation, as measured by the Consumer Price Index (CPI), fell to 4.31 per cent in January 2025, down from 5.22 per cent in December 2024, according to government data released on Wednesday (12 January). 

This marks the lowest inflation rate since August 2024 and continues the downward trend observed since October 2024, when inflation peaked at 6.21 per cent, the highest in over a year.

Food Inflation Declines Sharply

A significant factor behind the easing inflation is the sharp drop in food prices.

The Consumer Food Price Index (CFPI) recorded 6.02 per cent food inflation in January, down from 8.39 per cent in December, reflecting a notable 237 basis point reduction.

• Rural food inflation was recorded at 6.31 per cent, while urban food inflation was lower at 5.53 per cent.

• Prices of vegetables, eggs, pulses, and cereals saw a decline, contributing to the overall easing of inflation.

However, some food items continued to experience high inflation, including coconut oil (54.20 per cent), potato (49.61 per cent), and garlic (30.65 per cent). On the other hand, jeera (-32.25 per cent), ginger (-30.92 per cent), and LPG (-9.29 per cent) saw the steepest deflation.

Rural vs. Urban Inflation Trends

The inflation drop was witnessed across both rural and urban regions:

• Rural inflation decreased from 5.76 per cent in December to 4.64 per cent in January.

• Urban inflation fell significantly from 4.58 per cent to 3.87 per cent in the same period.

Food inflation in rural and urban areas also declined, bringing relief to consumers struggling with rising food prices in previous months.

RBI’s Inflation Outlook

The Reserve Bank of India (RBI) has projected inflation at 4.8 per cent for the current financial year, with expectations of further easing to 4.2 per cent next year.

The central bank aims to maintain inflation at 4 per cent, with a tolerance band of 2 percentage points on either side.

With inflation showing signs of stability, another rate cut by the RBI could be on the horizon, especially following the recent interest rate reduction, the first in nearly five years.

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