NEW DELHI: Retail inflation eased to a five-month low in January as vegetable prices moderated, bringing much-needed relief to authorities battling stubborn price pressures, while industrial output growth slowed, led by a sluggish manufacturing sector.
Data released by the National Statistical Office (NSO) on Wednesday showed retail inflation, as measured by the consumer price index (CPI), rose an annual 4.3% in Jan, slower than the 5.2% in Dec and below the 5.1% recorded in Jan last year. Rural inflation was higher at 4.6% and urban at 3.9%. The food price index slowed to 6% in Jan from 8.4% in Dec. The NSO said that there is a decline of 91 basis points in inflation in Jan, compared to Dec last year, and it is the lowest year-on-year inflation after Aug 2024.
A sharp decline of 237 basis points is seen in food inflation in Jan, compared to Dec last year, and it is the lowest after Aug last year. The easing of food inflation and overall price pressure have prompted the Reserve Bank of India to cut rates by 25 basis points for the first time in nearly five years.
“The inflation rate for vegetables continued to ease, dropping to 11.4% in Jan from 26.6% in Dec. Vegetable inflation has been a significant contributor to overall CPI inflation in recent months, averaging 27% since Jan 2024. In fact, just by excluding vegetables, CPI inflation averaged at 3.6% since Jan 2024, well below the RBI’s target of 4%,” said Rajani Sinha, chief economist at ratings agency CareEdge.
Sinha said that in addition to the decline in vegetable inflation, ongoing deflation in spices and a fall in inflation of pulses, eggs and cereals have contributed to the overall decrease in food inflation. “Robust kharif production along with good progress of rabi sowing have brightened outlook of food inflation,” said Sinha.
Separate data released by the NSO showed the index of industrial production (IIP) growth slowed to 3.2% in Dec from a downwardly revised 5% expansion in Nov. Manufacturing sector growth slowed to 3% in Dec compared to 4.6% in Dec 2023. “IIP growth eased sharper than we had forecast to 3.2% in Dec 2024, led by manufacturing, even as the expansion in electricity and mining output recorded a sequential uptick. In terms of the use-base classification, the trend was mixed, with a sequential improvement in primary, capital and intermediate goods, and a dip in infra/construction goods, and consumer durables and non-durables,” said Aditi Nayar, chief economist at ratings agency ICRA.