India's headline retail inflation rate decelerated to a three-month low of 5.10 percent in January due to easing food prices, according to data released by the Ministry of Statistics and Programme Implementation on February 12.
The Consumer Price Index (CPI) inflation print in December 2023 was 5.69 percent.
At 5.10 percent, the latest CPI inflation figure is as per expectations, with economists having predicted prices likely rose 5.09 percent year-on-year in the first month of 2024.
| JAN 2024 INFLATION | INDEX CHANGE, MoM | |
| CPI | 5.10% | -0.1% |
| Food | 8.30% | -0.7% |
| Cereals | 7.83% | 0.8% |
| Meat, fish | 1.19% | 0.9% |
| Edible oils | -14.96% | -0.7% |
| Fruits | 8.65% | -2.0% |
| Vegetables | 27.03% | -4.2% |
| Pulses | 19.54% | -0.9% |
| Clothing, footwear | 3.37% | 0.2% |
| Housing | 3.20% | 0.4% |
| Fuel, light | -0.60% | 0.4% |
| Miscellaneous | 3.82% | 0.2% |
While headline retail inflation cooled in January, it has now spent 52 consecutive months above the Reserve Bank of India's (RBI) medium-term target of 4 percent. However, inflation has now been within the tolerance range of 2 percent to 6 percent for the fifth month in a row.
The decline in inflation in January was driven by weaker price momentum - indicated by the month-on-month change in prices - in food items, with the Consumer Food Price Index down 0.7 percent from December 2023. Within food items, the price index for vegetables was down 4.2 percent month-on-month (MoM), while that of fruits was lower by 2.0 percent.
Among the rises within food items were egg (3.5 percent) and cereals and products (0.8 percent). On the whole, food inflation was down at 8.30 percent from 9.53 percent in December 2023.
According to Madhavi Arora, lead economist at Emkay Global Financial Services, vegetable inflation has remained elevated due to the month-on-month fall in prices being less than the usual seasonal behavior.
"Factors like delayed sowing amid patchy monsoons and consequent delayed kharif harvest have been impeding a higher correction in their prices. The truckers' strike earlier in the month may have also contributed to the disruption to supply of fruits and vegetables," Arora added.
Food items apart, the month-on-month price increase was modest, with the price indices for housing, fuel and light, clothing and footwear, and miscellaneous categories rising by 0.2-0.4 percent.
As a result, core inflation - or inflation excluding food and fuel - fell further to 3.6 percent from 3.9 percent in the last month of 2023.
The latest inflation data comes days after the RBI's Monetary Policy Committee left the policy repo rate unchanged at 6.5 percent for the sixth meeting in a row. According to the central bank's latest forecast, CPI inflation is seen at 5.0 percent in the current quarter before easing to 4.0 percent in July-September. However, it is then set to rise to 4.7 percent in the first quarter of 2025.
"With RBI stating risk of food inflation translating into generalised inflation, we expect RBI to continue cautious stance," said Akhil Mittal, Senior Fund Manager-Fixed Income at Tata Asset Management.
"However, softening of core inflation should provide confidence to trajectory of inflation moving as expected... We do not see premature easing from RBI. We think RBI would rather ease or indicate easing only when they are sure of achieving inflation target durably. We believe second half of 2024-25 could open space for easing," Mittal added.
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