Retail Inflation in India Slows to Four-Month Low of 5.22 Percent in December

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Retail Inflation in India Slows to Four-Month Low of 5.22 Percent in December

Retail inflation in India dropped to a four-month low of 5.22 percent in December, down from 5.48 percent the previous month, largely influenced by the moderation of prices in the food basket. Data from the National Statistics Office revealed that food inflation decreased to 8.39 percent in December, marking a decline from 9.04 percent in November and 9.53 percent in December 2023. The NSO highlighted that the Consumer Price Index (CPI) and food inflation rates in December 2024 were the lowest recorded in the past four months.

The Reserve Bank of India recently revised its inflation forecast for the fiscal year, raising it to 4.8 percent from 4.5 percent, citing persistent food price pressures that are expected to keep headline inflation elevated during the December quarter. The CPI-based headline inflation in India rose from an average of 3.6 percent in July-August to 5.5 percent in September and further to 6.2 percent in October 2024. Housing inflation for December 2024 was reported at 2.71 percent year-on-year, slightly lower than the 2.87 percent recorded in November 2024.

The latest retail inflation figure in India falls within the Reserve Bank of India's medium-term target range of 2-6 percent. Food inflation, a long-standing issue, increased by 8.39 percent annually in December compared to 9.04 percent in the previous month and 9.53 percent a year ago. The aftermath of elevated food prices led to a surge in India's retail inflation to a 14-month high of 6.2 percent in October, with food inflation hitting a 15-month high of 10.9 percent. Overall, rural inflation eased to 5.76 percent in December, down from 9.10 percent in November, while urban inflation decreased to 4.58 percent from 8.74 percent in the previous month.

The Reserve Bank of India's Monetary Policy Committee lowered its growth projection for the fiscal year to 6.6 percent from 7.2 percent in December and increased its inflation estimates to 4.8 percent from 4.5 percent for the same period, expressing concerns over food inflation and its impact on the economy.