India’s retail inflation, as measured by the Consumer Price Index (CPI), decreased to 5.22% in December 2024 from 5.48% in November, marking a four-month low. This decline is primarily attributed to a slowdown in food price increases, particularly in vegetables, cereals, and pulses.
Key Highlights
Food Inflation: The Consumer Food Price Index (CFPI) recorded a year-on-year increase of 8.39% in December, down from 9% in November. Notable declines were observed in vegetables (26.6% from 29%), pulses (3.8%), and cereals (6.51%). Conversely, prices of meat (5.3%), eggs (6.85%), edible oils (14.6%), and fruits (8.5%) saw an uptick.
Core Inflation: Excluding volatile food and fuel items, core inflation fell to 3.5% in December, indicating a moderation in domestic demand pressures.
Regional Variations: Rural areas experienced an inflation rate of 5.76%, while urban areas had a lower rate of 4.58%.
Implications for Monetary Policy
The easing of inflation has led to expectations that the Reserve Bank of India (RBI) may consider reducing interest rates in its upcoming monetary policy review in February. However, factors such as a depreciating rupee and global trade uncertainties pose risks to future inflation, which may influence the RBI’s decision.
Summary of the news
| Why in News | Key Points |
|---|---|
| India’s retail inflation eased to 5.22% in December 2024, from 5.48% in November 2024 | – Retail inflation dropped to a four-month low of 5.22%. – Driven by slower food price growth, particularly vegetables, cereals, and pulses. – Consumer Food Price Index (CFPI) rose by 8.39%, down from 9% in November. – Core inflation (excluding food and fuel) decreased to 3.5%. – Rural inflation: 5.76%, Urban inflation: 4.58%. |
| Inflation Data | – CPI (Consumer Price Index): 5.22% in Dec 2024 – Food Inflation: 8.39% in Dec 2024 – Core Inflation: 3.5% in Dec 2024 |
| Food Price Trends | – Vegetables: Inflation reduced from 29% to 26.6% – Pulses: Inflation decreased by 3.8% – Cereal prices: Inflation decreased by 6.51% |
| Reserve Bank of India (RBI) Expectations | – Inflation easing could lead to possible interest rate cuts by the RBI. |
| Regional Inflation Comparison | – Rural Areas: 5.76% Inflation – Urban Areas: 4.58% Inflation |
| Relevant Statics | – RBI: India’s central bank – National Food Security Act (NFSA): Reference to food price trends impacting policy |
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