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December Retail Inflation Hits 4-month Low of 5.2% as Food Prices Cool
- The Economic Times |
- Economics (Macroeconomics) |
- 2025-01-14
- Inflation
- Food Inflation
India's retail inflation dropped to 5.2% in December 2023, a four-month low, due to decreased food prices. Despite the decline, economists remain divided on a rate cut amid geopolitical concerns and rising rural inflation.
India's Retail Inflation
India's retail inflation eased to a four-month low of 5.2% in December, primarily due to a decline in food prices.
Key Economic Insights
- Economists are divided on a possible rate cut in February, citing the need to monitor geopolitical developments.
- The rupee depreciation has led to concerns about higher imported inflation, especially for oil products.
- The rupee fell below 86 per dollar, marking a significant depreciation.
- Average inflation in 2024 was 5%, lower than the 5.7% recorded in 2023.
- Rural inflation was higher at 5.8% compared to 4.6% in urban areas.
Monetary Policy
The Reserve Bank's Monetary Policy Committee (MPC) will meet from February 5-7. The policy rate has been unchanged at 6.5% for 11 consecutive times.
- Aditi Nayar emphasized that the significant decline in vegetable prices might lead some MPC members to consider an early rate cut.
- Paras Jasrai noted that fiscal arithmetic could influence monetary policy actions.
Inflation Details
- Core inflation, excluding food and fuel, was at a three-month low of 3.6% in December.
- Food inflation fell to a four-month low of 8.4% in December from 9% in November.
- Vegetable prices increased by 26.6% in December but were at a four-month low overall.
- Inflation was higher in 10 out of 22 states and UTs compared to the national average, with Chhattisgarh recording the highest at 7.6%.
Future Projections
- The RBI projects inflation to be at 4.5% for the January-March quarter.