Context:
India’s retail inflation dipped to 4.31% in January 2025 from 5.22% in December 2024 and 5.1% in January 2024. Food inflation declined for the third straight time, though fruits and edible oils saw an increase in price.
Key Highlights:
- Inflation Trends
- Retail inflation dropped to 4.31%, a five month low.
- Food inflation dropped to 6% in January from 8.4% in December.
- Edible oils and fruits saw sharp price increases despite the overall slowdown.
- Urban vs Rural Inflation
- Urban inflation: 3.87%, dipping below RBI’s 4% target.
- Rural inflation: 4.64%, though lower than December’s 5.8%, remains above the median target.
- RBI’s Interest Rate Cut & Future Projections
- RBI cut interest rates by 0.25 percentage points, citing falling inflation and the necessity to spur growth.
- Inflation will be 4.4% on average in January March and ease to 4.2% in 2025 26.
- Impact of Rupee Depreciation & Imported Inflation
- Economists alert over imported inflation threats following rupee depreciation.
- Most sensitive problems
- Edible oils, fertilizers, and petroleum prices.
- Edible oils especially susceptible, since 60% of India’s availability is imported and liable to import duties & world prices.
