Cooling vegetable prices help bring CPI inflation to five-month low in Jan

Softer vegetable costs, particularly that of kitchen staples, helped ease retail inflation to a five-month low of 4.31% in January 2025 and costs are anticipated to fall additional in coming months. Whereas January’s numbers again the choice of the Financial Coverage Committee to chop charges, analysts nevertheless warning that going ahead the depreciating rupee may have an effect on the financial coverage.

Based on official information launched on Wednesday, shopper value index-based inflation eased to 4.31% in January from 5.22% in December. It was at 5.1% in January 2024. Client meals value inflation additionally cooled to six.02% in January this 12 months from 8.39% in December 2024.

Inflation within the meals and drinks basket additionally eased to five.68% in January from 7.69% within the earlier month. Vegetable inflation remained excessive however eased to 11.35% in January from 26.56% in December.

With costs seen to proceed moderating in February, retail inflation is seen to anticipated to ease additional. ICRA has pegged CPI inflation in February at 4%. India Scores and Analysis additionally forecast CPI inflation in February and March 2025 to be within the 3.9%-4% vary.

“As per the early information for February 2025 (till February 10, 2025), the common retail costs of 14 of the 22 important commodities (barring wheat, sugar, and most edible oils) softened on a sequential foundation within the month. The appreciable moderation in vegetable costs is more likely to augur properly for the year-on-year meals and drinks inflation print for the month, which is anticipated to ease to a six-month low of about 5.2% in February 2025,” stated Aditi Nayar, Chief Economist and Head of Analysis and Outreach, ICRA.

Suman Chowdhury, Govt Director & Chief Economist, Acuité Scores & Analysis famous that the steep correction in tomato, onion, and potato costs—key CPIF elements—has contributed to this downward trajectory in meals inflation. “Moreover, a decline in pulses inflation, supported by tariff-free imports and powerful harvest expectations, has additionally helped ease the meals value pressures,” he stated. Wanting forward, rabi sowing has been as per expectations and vegetable costs have continued to drop additional in February 2025, which ought to assist hold the headline inflation in verify for the approaching two months, he stated.

Analysts have nevertheless warned that edible oil costs, with retail inflation within the commodity rising to fifteen.64% in January may pose a problem in coming months together with larger imported inflation as a result of rupee fall.

Core inflation noticed a marginal uptick to three.7% in January from 3.6% within the earlier month.

The RBI has pegged retail inflation within the fourth quarter of the fiscal at 4.4% and expects it to ease to 4.5% within the first quarter of FY26. The following assembly of the RBI’s MPC can be held in April.

Paras Jasrai, Senior Analyst, India Scores famous that the long run coverage easing can be information dependent. “The financial coverage motion in April 2025 financial coverage relies on forex motion and liquidity within the system,” he stated.

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Financial institution expects the inflation trajectory to stay benign within the months forward to supply room for one more 25 foundation factors of price minimize by the MPC. “Nevertheless, the tempo of INR depreciation will have to be carefully watched for spillovers on home inflation,” she famous.